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Consumer goods firm Creightons (LSE: CRL) had a strong 2020. The firm — which makes skin, hair, and beauty products — saw its pre-tax profits rise 64% during the six months to 30 September. Creightons’ share price has risen by over 55% since June 2020.
This small-cap has a market-cap of just £57m and may be under the radar for many private investors. However, it’s been in business since 1954 and has delivered steady growth in recent years — sales have doubled since 2016. I think there could be more to come.
Creightons sells under a range of brands. The firm’s products are typically small, repeat purchases, such as shampoo and moisturisers. In some ways, this business reminds me a little of FTSE 100 giant Unilever, whose beauty and personal care business sells similar products.
By backing the smaller company over the last five years, Creightons’ shareholders have seen an 850% share price gain and received a few dividends. By contrast, Unilever (which I hold) has seen its share price rise only 35%, plus (bigger) dividends.
Unilever’s brands are much larger and better known. Its product range is more diverse, including food, drink and cleaning products as well. But the larger company is also more mature — I can’t see Unilever matching Creightons’ recent growth.
The big question for me is whether Creightons can maintain its recent run of growth. The company’s annual sales have risen from £21m in 2016 to £56m over the 12 months to 30 September 2020. Pre-tax profit has risen from £0.6m to £4.7m over the same period.
That’s an impressive record, in my view. But one concern I have is that last year’s strong results were boosted by pandemic demand for hygiene products, such as hand sanitisers.
In its half-year results, the company admitted that “the main driver” of sales growth during the period was increased sales of hygiene products, sanitising gels and handwashes. The biggest buyers of these products were the NHS and “major UK retailers”. I’d imagine demand for these products could ease over the coming year.
Sales of the group’s branded products were said to have “continued to grow” last year, but the company didn’t provide numbers.
Creightons share price: buy, sell, or hold?
In my view, there’s quite a lot to like about Creightons. My analysis suggests the company has a strong balance sheet, with minimal debt. Profit margins have improved in recent years and Creightons’ own brands appear to be gaining strength.
On the other hand, I can see some risk that sales growth might slow over the next 12-18 months, as demand linked to the pandemic eases.
Creightons shares are currently trading on about 15 times earnings from the last 12 months. The company doesn’t appear to have any broker coverage, so I can’t find any forecasts for this year. However, my research suggests the stock’s current valuation is higher than its historic average, suggesting it may not rise further in the short term.
I think Creightons’ share price is probably up with events. I’d need to do more research before deciding whether to buy this stock at current levels. But I can see this business as a possible long-term investment for me with a rising share price further down the line. If I already owned the shares, I’d be happy to continue holding.
The post Will the Creightons share price continue to rise? appeared first on The Motley Fool UK.
Roland Head owns shares of Unilever. The Motley Fool UK has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2021