4 reasons Breville Group Ltd should be on your watchlist

Despite Breville Group Ltd (ASX: BRG) being a household name thanks to its invention in 1974 of the jaffle maker (surely one of the best inventions ever to come out of Australia!), as a listed company it arguably doesn’t get as much attention as it deserves.

With a market capitalisation of $900 million and a share price that has soared 204% in the past five years, the stock has provided significant outperformance for shareholders compared with the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) which has gained just 17.5% over the same period.

With Breville recently holding its annual general meeting investors have been reminded of the positive investment attributes this business possesses. Here are four reasons to keep an eye on this branded small electrical appliances company.

  1. Innovative: Breville continues to be a leader rather than a follower in innovative appliance development; recently this has included partnering with world renowned chef Heston Blumenthal.
  2. Growth: Despite losing the Keurig distribution license for the Keurig brand in Canada, Breville still managed to grow revenue over the course of financial year (FY) 2014 by 11.3% to $541.6 million. Long-term growth has also been solid with earnings before interest and tax growing at a compound annual growth rate of 24.6% over the past five years. Earnings per share meanwhile have grown at 32.8% over the past five years.
  3. Dividends: The board declared an increase in the dividend to 27 cents per share fully franked in FY 2014. The higher dividend follows an impressive trend which has seen dividends per share increase at a compound annual rate of 37.5% over the last half decade.
  4. Balance Sheet: Breville’s balance sheet is in tip top shape. At 30 June 2014, Breville was in a net cash position with the group holding $47 million in net cash.

Investment metrics

Based on consensus forecast earnings and dividends provided by Morningstar, Breville is trading on a FY 2015 price-to-earnings ratio and fully franked dividend yield of 17x and 4% respectively; this arguably makes it a stock for the watch list rather than the buy list at current prices.

There is another way to gain exposure to Breville which could also be of interest to investors and that is via an investment in Premier Investments Limited (ASX: PMV). Premier has an approximate 27% interest in Breville as well as a number of other assets such as Smiggle and would provide investors with a more diversified retail exposure.

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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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