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A Beautiful Growth Stock You Can Buy Today

Investors love fully franked dividends. Commonwealth Bank of Australia (ASX:CBA) is yielding 5.3%. Australia and New Zealand Banking Group (ASX:ANZ) is paying a 5.7% dividend, while Westpac Banking Corp (ASX:WBC) is paying even more at 6.2%. All fully franked. If you are looking for income, I can understand the attraction of these big banks.

But what about capital appreciation? And what about dividend growth?

The big banks are struggling to grow their earnings, and they are under pressure from regulatory bodies to strengthen their capital structure. Add to the mix the challenging housing market, and we have a concoction that’s not favourable for earnings growth at the big banks.

If you are looking for capital growth and an increasing dividend over the medium to long term, my suggestion would be to look beyond the banks.

I ‘m excited about a company with a rather odd name — BWX Ltd (ASX: BWX). It’s a vertically integrated developer, manufacturer, and distributor of branded skin- and hair-care products. BWX’s flagship brand Sukin has taken the pharmacy distribution channel by storm. Sukin is all about high-quality but affordable beauty products based on all-natural ingredients, with production processes that are sustainable and environmentally-friendly.

In the first half of 2017, BWX’s revenue was up 36% over the prior corresponding period to $38 million. Operating profit (EBITDA) increased 31% to $13 million, and gross margin was a mouthwatering 65%, up from 59% in the prior period.

While BWX’s Australian business is roaring, its nascent international segment is worth paying some attention. In particular, international sales surged 116% to $6.7 million in the first half of 2017. Domestic sales now account for 78% of Sukin sales, with the remainder now coming from overseas sales.

BWX is a small company in a big ocean. Globally, the skincare market is estimated to rake in $150 billion annually, with sales growing in low single digits. If BWX can just get a small fraction of the big pie, we would be laughing all the way to the bank.

I urge you to put this stock on your watchlist for further research.

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Motley Fool contributor Anirban Mahanti has no position in any stocks mentioned. The Motley Fool Australia owns shares of BWX Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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