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Now Is the Time to Buy Uni Select Inc.

In case you haven’t head of Uni Select Inc. (TSX:UNS) before, you may want to remember the company. This is one stock that should be in your portfolio.

Uni Select is a distributor of automotive refinish and paint-related products as well as automotive aftermarket parts in Canada. In all, the company has over 250 stores in its network.

Uni Select is set for another great year

Uni Select was one of the top-performing stocks in the market in 2015; it finished off last year on a high as well, even undergoing a 2:1 split to attract even more investments. This year, the stock is off to a great start — up by 6.2%. Over a longer two-year term, that figure is over 90%.

Even better, recent quarterly updates from the company suggest that Uni Select is set for further growth in 2017.

In the most recent quarter, Uni Select reported earnings per share of US$1.37, which is an improvement over the US$0.94-per-share loss posted in the same quarter last year. On an adjusted basis, earnings beat last year by 3.8%, coming in at US$58.3 million, or US$1.38 per share.

Free cash flow saw a significant increase of 39.4% over last year, or US$109.4 million. That increase is primarily attributed to income tax refunds and newly acquired business operating income.

Opportunity awaits

As great as Uni Select sounds, the latest results only scratch the surface in terms of the opportunity it has for growth.

Uni Select is well known in the industry as a consolidator across both the aftermarket parts and automotive paint segments of the automotive industry.

In the past year alone, Uni Select has completed seven acquisitions, which added 45 new locations to the company’s network.

Looking over the past decade, that number increases to well over 70 acquisitions. Keep in mind that each acquisition becomes another location (or multiple) for the company, another integration point, and potentially another avenue for increased economies of scale.

Despite that level of activity, Uni Select’s share of the market is still just over 20%, meaning the industry is still fragmented enough that there are still opportunities for more acquisitions.

That opportunity has analysts optimistic about the stock; they’ve slapped a “Buy” rating and price target as high as $50 on the stock.

Here’s why Uni Select is a great investment

The market for aftermarket parts as well as paint remains relatively strong and doesn’t appear set to falter anytime soon. Uni Select is emerging as a leader in a lucrative segment of the market that is shockingly absent from the radars of most investors.

Uni Select pays a quarterly dividend of $0.09 per share, fetching a yield of 1.09% at the current stock price. While you probably won’t see that income as a reason to invest, reinvested dividends could add up over time to provide even more growth.

And speaking of growth, management is calling for strong growth over the next year with nearly 10% EPS being mentioned. Given Uni Select’s history of beating guidance, the next year should be particularly good for investors.

Finally, there’s the impact of the loonie.

Being a distributor of automotive parts and paint products, Uni Select falls into a class of companies that would reap benefits of a lower-priced loonie, as goods sold in foreign markets are suddenly priced lower and therefore are more competitive against local goods. For the moment, the loonie continues to stubbornly defy a logical trend downward.

In my opinion, Uni Select remains a great option for those investors looking to diversify their portfolio. Strong growth, positive results, and a lucrative path to expansion make the company a great addition to any portfolio.

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Fool contributor Demetris Afxentiou has no position in any stocks mentioned.

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