Why I think it’s time to buy SAI Global Limited shares

Credit: mages Money

Every single year for the last 10 years SAI Global Limited (ASX: SAI) has grown its revenue year over year. Back in 2005 the company posted revenue of $160 million and last year it had increased all the way up to just shy of $550 million. This works out to be a whopping compound annual growth rate of 13% for this growing Australian risk management firm.

SAI Global operates its business in several different sectors, providing varied solutions for Food Certification; Supplier Compliance, Environment, Health and Safety, Complaints Management, and Management Systems, to name a few.

I like companies that provide services to a diverse range of sectors as I feel it offers investors that little bit of security against wild swings in earnings related to sector slowdowns. Much like Brambles Limited (ASX: BXB), another strong share that features in the Industrials sector, a large portion of its revenue is from overseas. This is very advantageous with a weak Australian dollar.

The company’s success both domestically and internationally has been the reason behind this outstanding growth. I feel the company is positioned well to continue growing the top line at a high rate, and expect it has the potential to continue for another 10 years as it looks to grow its online offering.

Backing up the growth is its long-term client base. SAI Global currently has an exclusive agreement with Standards Australia to distribute Australian standards until December 2023. Standards Australia is an independent, not-for-profit organisation, recognised by the Australian government as the peak non-government Standards body in Australia. The December 2018 renegotiation of the contract is still some time away, and it is highly unlikely that Standards Australia would grant the contract to a foreign company.

Thus I feel that this contract should be relatively secure, but it would be prudent for long-term investors to mark it in their memory and keep a close eye on developments when they eventually occur.

Trading at a price-to-earnings ratio of just 14 puts the shares far below the Industrials sector average of 23.9, as well as just below the broad market average of 14.9. With analysts expecting its earnings and its dividend to grow by 8% and 12% per annum through to 2018, I believe the shares offer both share price gains and a strong dividend.

Foolish takeaway

Risk management might not be a glamorous industry to invest in, but sometimes the simple investments provide you with the best returns.

The technology that’s going to REPLACE the Internet is already here…

Dollar for dollar, insiders are calling it one of the biggest new markets in the history of modern business… NOW is the time to get in on the hush-hush industry that could be poised for growth of over 4,463%+ by 2020… And the 1 ASX stock that stands to grow YOUR money right alongside it! Simply click here to learn its name.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.