Ansell: A stock for all seasons

As more and more companies touch their 52-week lows as the market continues to lose steam, Ansell is bucking the trend.

a woman

As more and more companies touch their 52-week lows as the market continues to lose steam, Ansell (ASX: ANN) is bucking the trend. The rubber glove and condom manufacturer is hitting not just fresh 52-week highs but also all-time highs.

Ansell has built itself a world-class business with 29 facilities spread across 16 countries. Through an intense focus on having the number one or two position in each market it operates in, the company has maintained a lean cost structure and strong brand reputation. Its most recent interim results were pleasing although not stellar, with strong free cash flow and a share buy-back balancing the 14% fall in earnings per share. Given the necessity of its products, a solid growth profile and highly regarded management, Ansell’s business is robust.

Valuation

Certainly investors aren’t buying Ansell for its dividend yield. With a share price of $17.65 and a forecast of 37 cents in total for the next two dividends, the yield is just 2.1%. Rather, investors are buying Ansell for its growth profile. On Goldman Sachs’ numbers, Ansell will grow its earnings per share by over 20% from 2013 to 2014. Should the company meet these expectations, then the company is trading on an undemanding 14.5 times 2014 earnings.

As the chart below shows, over the past decade Ansell stock has far outperformed the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO), with the company’s shares rising 195% compared with a 59.6% return from the index.

tmchart

Source: Google Finance

Foolish takeaway

It can be hard for disciplined investors to purchase companies whose share prices have been going up and up and hitting new highs. As Foolish investors we sometimes feel the ship has already sailed and we’ve missed the boat. This is not a bad mindset to have per se. It is certainly better than feeling you are late to the party and you must join in at any cost! However it is also important to look past what might appear at first to be a fully priced stock and consider the growth potential.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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