Here’s a Boring Stock Whose 186% 5-Year Return Is Anything but Boring

CCL Industries Inc. (TSX:CCL.B) is one “boring” stock that has paved the way for ample shareholder returns today and for years to come.

Karen Thomas, MSc, CFA

Karen is a stock market enthusiast focused on uncovering those stocks that she believes the market has mispriced. She does this through fundamental and quantitative analysis of companies and their industries, as well as a study of future opportunities and trends. She holds a Masters degree in Finance, the CFA designation, and has over 20 years of experience in the investment management industry. Having worked at a major pension fund, as well as two leading mutual fund firms as an analyst and portfolio manager, she has solid investing expertise which she aims to share with her readers.

Published June 1, 2019 1:31 pm EDT

These days we have plenty of exciting businesses to choose from when considering which stocks to buy with our hard-earned dollars. Many companies in the tech space, the renewables space, and in the healthcare space would easily qualify.

But while it’s easy to let our feelings cloud our judgement, we shouldn’t be influenced by whether we believe a company offers an exciting product or service. Although difficult at times, we have to separate excitement from good businesses and business decisions.

In investing, I don’t care if a business is exciting or boring, as sometimes the most boring businesses make for the best investments because they have visibility, predictability, and stability on their side.

I give you CCL Industries Inc. (TSX: CCL.B), a “boring” company that’s involved in labels and packaging for the consumer, healthcare, and automotive sectors, which has has certainly proven the value of seeing past the “boring” in the business. With a five-year return of 186% and lasting power, CCL has been a shareholder’s dream.

This $10 billion label and packaging company has grown consistently and profitably over the last 10 years, creating shareholder wealth through both capital appreciation and dividend payments.

In fact, the company has grown from revenue of $1.2 billion in 2009 to revenue of $5.2 billion in 2018, for a compound annual growth rate of 17.7%.

The corresponding increase in free cash flow has been even more impressive. In 2009, the company generated $52.3 million in free cash flow and in 2018, it generated $420 million for a compound annual growth rate of 26%.

After a short pause, it looks like CCL is coming back, ready to climb higher again. In its most recent results, the first quarter of 2019 saw the company beat analyst expectations and drive home a 5.5% increase in EPS, 3% organic growth and the rest acquisition growth.

Since then, CCL continued to make small acquisitions to increase its market share and penetration, paying $6 million in cash for two acquisitions that will add to the company’s revenue and clout going forward.

CCL has $500 million in cash on its balance sheet and is prepared to continue along its growth path, paying shareholders generously by continuing to create shareholder value.

Contrast this with some of the more “exciting” companies like Sierra Wireless Inc. (TSX: SW)(NASDAQ: SWIR), whose machine-to-machine connectivity technology, which connects cars and different machines together, has brought much fanfare over the years. But with a loss of 22$, its five-year stock price performance is anything but exciting.