Not all the companies listed on the FTSE 100 come with great brand presence or bask in the limelight through fantastic operations. There are many quality firms just quietly going about their business.
One pick I like the look of is Intertek Group (LSE: ITRK). Here’s why I’m planning on buying some shares when I next have some cash to invest.
Testing and safety
Intertek is a leading testing, inspection, and certification services business. It primarily focuses on consumer products, and it assesses these against safety and a multitude of regulatory standards.
The shares have experienced a decent run over the past 12 months, up 15%. At this time last year, they were trading for 4,136p, compared to current levels of 4,722p.
Why I’d buy some shares
It’s worth remembering that pretty much all of the products we use as consumers on a day-to-day basis need to be tested and vetted. For the businesses selling them, regulatory fines and consequences can be costly. With Intertek’s vast presence with close to 300 laboratories around the world, as well as a track record, it is in a prime position to benefit from this. In fact, I’d go as far as saying this demand offers the business defensive traits.
For me, it’s hard to ignore Intertek’s growth journey. For context, the shares have returned approximately 700%, plus dividends, across the past 20 years. Plus, its recent share price performance is a sign of defensive ability and resilience, despite a cocktail of economic and geopolitical issues facing the world.
Moving on, the shares look decent value for money to me on a price-to-earnings ratio of 19. Let me be clear, this is no bargain basement stock. Part of me wishes I had bought some shares earlier. This current P/E ratio is higher than the FTSE 100 index average of 12. However, I have no qualms buying a fantastic company at a fair price.
Finally, a dividend yield of close to 3% sweetens the investment case. This is supported by a healthy balance sheet, as well as a track record of good cash generation, and high return on equity. However, I do understand that dividends are never guaranteed. Plus, past performance is never a guarantee of the future.
Risks to note
Despite my stance, there are still risks that could harm earnings and returns. My biggest worry is a slowdown in key markets linked to economic turbulence. For example, when the pandemic struck, the business struggled as product testing was less of a priority in core markets. This is an extreme example. Nevertheless, a slow down in key growth economies such as China, and a potential recession in the US, could have a knock on effect for the testing firm.
Overall, Intertek looks to me like a quality business on all fronts. It possesses sound fundamentals, a solid track record and presence, as well as defensive traits, due to the important nature of its offering.
The post 1 under-the-radar FTSE 100 gem I reckon is a no-brainer buy appeared first on The Motley Fool UK.
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Sumayya Mansoor has no position in any of the shares mentioned. The Motley Fool UK has recommended Intertek Group Plc. 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.
