Image source: Getty Images
I like to hold a small cap stock or two, or three, because of their growth potential.
One that I am serious about now Henry Boot (LSE: BOOT), a UK-based real estate development, property investment, development, and construction company. At least it deserves more attention because of that cracking name!
Joking aside, I think the company's prospects look interesting, so I want to dig deeper. For the record, Henry Boot can be found at FTSE Smallcap index, and with a share price of around 230p, the market capitalization is around £311m.
Good announcements
The stock began to rise in April after a decline that began in late spring 2022. So I hope that this change of character in stocks is driven by something important in the business.
Sure, there was good news from the company in the April 16 announcement, and it looks like it has started a new uptrend.
The company has announced the sale of 494 residential properties in Cambridge to Barratt Developments (now Barratt Redrow). The sale was completed in July, bringing Henry Boot an internal rate of return of 15% per annum. So that was the end of a good business investment.
Chief executive Tim Roberts said at the time that sales were showing “continuing need” the company has been seeing its best sites. It was “especially encouraging” given the challenging market backdrop and low transaction volumes, Roberts said.
It seems that the stock market has reassessed Henry Boot's business opportunities in a positive light. So that may be why the stock price has been rising.
Roberts considers that the disposal reflects the company's experience in obtaining planning permission for complex sites as well “navigating them through an increasingly complex planning system“. So that ability enables the company to sell plots to house builders.
An example is a good understanding of how a business makes a living. But a number of positive announcements have followed since then, with an interim results report presented on 17 September.
Inspirational vision statement
One risk to stocks comes from Henry Boot's business being sensitive to general economic conditions. It is also affected by the sentiment surrounding the wider field of architecture. So it is one of those stocks that needs careful consideration and time by potential shareholders.
Still, the September outlook statement from the company is optimistic in tone. A strengthening economy and the prospect of lower interest rates will likely help business. So it might be a good time to focus on stocks.
Meanwhile, multi-year growth in the budget has been strong, with the forward-looking yield to 2025 around 3.6%.
I think that's an attractive rate of return for shareholders. So if I had money to invest right now, I'd go in for some research with a view to considering a few stocks for November and beyond. If the economy and housing market continue to improve, Henry Boot may be well placed.
Source link
