While most of the stocks on the TSX today haven’t exactly seen massive growth, there have been a few that have come out ahead. Yet these are well known already to the public. Therefore, it can be quite hard to find an under-the-radar opportunity.
That’s why today, I’m going to discuss a growth stock that remains out of investors’ view — one that is still due for even more growth in 2024.
Richelieu Hardware
Richelieu Hardware (TSX: RCH) has been climbing higher in the last year. The hardware stock is up 17% in the last year. Yet shares of the stock dropped into oblivion last week after the company announced its earnings results.
The results were quite good, actually. Richelieu stock reported six acquisitions were completed during the quarter, with two before that. Therefore, the stock has been taking advantage of these higher interest rates and inflation to actually buy out companies on the cheap.
The stock saw $453.6 million in shares for the quarter, with its earnings before interest, taxes, depreciation, and amortization (EBITDA) rising 13% year over year. Meanwhile, the year saw $1.8 billion in sales, with EBITDA rising 12.9% year over year. It now holds a strong financial position, leading to even more
Why the fall?
It seems the fall comes from the company’s continued commitment to acquisitions. We remain in a volatile time, and institutional investors are likely to want cash on hand.
However, the stock is now looking to expand and consolidate its projects. It aims to do this through expansion projects. This includes modernizing centres, a new centre in Chicago and two more on the way.
Of course, all this costs money. Again, this is a time of higher interest rates and inflation. So, investors might be wondering if it’s worth it. If you’re to believe some analysts coming out, the answer is still yes.
Looking ahead
Richelieu stock continues to have plenty of cash on hand. It also has on hand plenty of pre-pandemic inventory, allowing it to sell for a greater profit. While demand will be slower in the near term, as interest rates and inflation fall, we’ll likely see sales pick up quite a bit in the medium term.
This should specifically come from new residential construction in the near future. That could seriously boost the company’s market with single-family homes being built once more as interest rates come down.
Meanwhile, you can now pick up Richelieu stock at a discount on all this growth. It currently offers a 1.27% dividend yield, which is far higher than the 0.96% average of the last five years. It’s also trading at 19.61 times earnings and 1.4 times sales, along with just 10.83 of enterprise value over EBITDA.
The stock, therefore, is in a strong cash position, even if sales are lower this year. Honestly, it just looks like this stock is providing an opportunity for investors when interest rates fall. And with shares due to rise, it’s likely that this means you’re getting a steal on a growth stock for 2024.
