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I am far from a DIY expert. However, I love the idea of home improvement projects, especially the finished result. What I love most is its appearance FTSE 100 the home improvement giant A kingfisher (LSE: KGF).
That's why I plan to buy more shares next month if I can free some money to invest.
DIY is king
Kingfisher may not be a household name, but I'm sure brand names under its umbrella like B&Q and Screwfix will resonate with many. From paint and pipes to screws and sockets, the business caters to almost every project and more.
The shares have shown good signs of promise over the past 12 months, in my opinion. They are up 21% from 236p this time last year to current levels of 286p.
Why I like Kingfisher shares
I think there's a lot to like about Kingfisher, which is why I'm stopping by. First, it is difficult to overcome the company's extensive presence, past history, current fundamentals, and future vision. I will skip the second point by acknowledging that the past is no guarantee of the future.
First of all, the large presence of about 1,300 stores in all its many brands, from nine European countries is a big point for me.
From a fundamental perspective, the shares look good value for money to me at a price-to-earnings ratio of 12. This is below the FTSE 100 average of 14.
Next, the 4.3% dividend yield sweetens the investment case. For context, the FTSE 100 average in this case is 3.5%. However, I understand that benefits are not guaranteed.
Going forward, the business appears to be in good financial shape, based on a strong, positive balance sheet. This can help current operations continue, as well as navigate growth plans and provide shareholder value.
Finally, looking to the future, I think that the UK's population growth, its highly dominant market, and housing inequality, could indirectly boost the company. Since there are few places to buy in the market, people will need to adjust what they have. In addition, lower interest rates may put more money in the pockets of consumers to be spent on home improvement needs. We saw the first cut earlier this month. However, there is no guarantee that there is more on the horizon. I would say that we are not out of the woods yet because of the current economic instability. Still, the long-term outlook is bright, in my opinion.
Problems I will look at
Despite my strong position, credible risks threaten the profitability and return potential of Kingfisher shares.
My main concern is the economic instability. When this happens, as we have seen in recent times, consumer spending can be negatively impacted, hurting non-essential spending, including DIY projects. Another aspect of this is inflationary pressure, as we have also seen recently, which can impact margins and the bottom line.
Overall, the pros outweigh the cons by some margin for me. A helpful presence, strong product strength, attractive valuation, and passive income opportunity helped me make the decision to buy some stocks when I could.
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