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CCL Industries: Sticking to Growth in the Label and Packaging Space

stock analysis
Image source: Getty Images

Written by Jitendra Parashar at The Motley Fool Canada

CCL Industries (TSX:CCL.B) has stood out as one of the most attractive stocks in the last decade by delivering outstanding returns to its loyal investors. Notably, CCL stock has surged 394% in the last 10 years against the TSX Composite Index’s 64% positive returns.

Despite the increased market volatility due to macroeconomic uncertainties, CCL Industries is continuing to outperform most of its peers in 2023. Let’s quickly analyze some key fundamental factors and discuss whether it’s still worth buying in 2023.

CCL Industries stock

If you don’t know it already, CCL Industries is a North York-headquartered spatiality label and packaging solutions provider with a market cap of $11.5 billion. Based on its 2022 financial figures, the United States and Puerto Rico geographical segment accounted for most of its sales, and the European market also made up a sizeable portion of its revenue.

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CCL stock currently trades at $64.98 per share with 18.3% gains on a year-to-date basis against the main TSX benchmark’s 5.7% advances. At this market price, it offers a 1.6% annual dividend yield and distributes its dividend payouts every quarter. While most investors may not find this dividend yield attractive, no one can ignore the fact that CCL’s dividends have grown at a very fast pace in recent years. For example, its annual dividend per share increased by 109% in five years between 2017 and 2022.

Delivering steady financial growth

CCL Industries is one of a few Canadian stocks that have the ability to be flexible and adaptable to changing economic conditions. For example, in 2020, when most businesses struggled to survive due to COVID-19-driven restrictions, CCL continued to post strong positive earnings growth thanks to its consistent focus on new strategic acquisitions to accelerate growth. This strategy is one of the key reasons why the company has managed to post strong 34% revenue growth and 33% adjusted earnings growth in the five years between 2017 and 2022, despite the challenging pandemic phase in between.

Even after facing inflationary pressures, CCL Industries has continued to deliver healthy financial growth in recent quarters, which justifies its stock’s year-to-date gains. In the first quarter of 2023, its total revenue rose 9% year over year to $1.7 million. More importantly, its adjusted quarterly earnings climbed 11% from a year ago to $0.93 per share, exceeding analysts’ expectations with the help of strong business performance in European and Latin American markets. These positive factors clearly reflect the underlying strength of CCL’s business model.

Bottom line

Interestingly, CCL stock has delivered positive returns to investors in 13 out of the last 15 years. And it may continue to soar in the future, as CCL Industries focuses on maintaining positive organic sales growth trends besides acquisition-related growth.

While the possibility of a looming recession is haunting investors in 2023, this relatively stable stock could be a great choice for investors who want to see their money grow in the long run without worrying about day-to-day market news and macroeconomic developments. Moreover, CCL’s robust balance sheet and growing cash flows make its stock even more attractive to buy now and hold for the years to come.

The post CCL Industries: Sticking to Growth in the Label and Packaging Space appeared first on The Motley Fool Canada.

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The Motley Fool recommends CCL Industries. The Motley Fool has a disclosure policy. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

2023