Why Burson Group Ltd is one of the best ASX shares to own


Since listing in May 2014, shares of Burson Group Ltd (ASX: BAP) have risen by more than 144% and have outperformed the S&P/ASX 200 (Index: ^AXJO) (ASX:XJO) by a lazy 148%.

The company’s potential as a great investment didn’t go unnoticed by a number of Fools and regular readers were made aware about this here, here and here.

The question for investors now is – can the share price continue to climb from here or are the shares due for a correction?

This question is simply impossible to answer accurately without the help of hindsight, so instead here is a list of pros and cons investors could consider when thinking about Burson Group:


  • Burson has grown into one of Australia’s largest suppliers of automotive aftermarket parts and services and this has allowed it to develop competitive advantages through scale and size.
  • The company now operates in over 600 locations throughout Australia and this allows it to target a broad range of customers at the same time as commanding serious purchasing power from suppliers.
  • The business is largely defensive and often regarded as ‘recession proof’. Consumers will often choose to repair their cars instead of purchasing a car, especially during tough economic times.
  • Burson has shown it has the ability to pass on rising costs to customers rather than absorbing them. As much as consumers hate paying for repairs when they go to a mechanic, they are generally left with no option but to pay what is quoted for both the parts and labour.
  • As Australia’s population continues to grow, the number of cars on the road is also increasing. This is obviously an important tailwind for the company.
  • As the slide below illustrates, the company has a diversified set of operations, which means it is not reliant on one particular division to drive growth and earnings.
Source: Burson Investor Presentation

Source: Burson Investor Presentation

  • Burson currently has 15 ‘optimisation projects’ aimed at delivering improved efficiency, and as outlined below, this is expected to deliver real financial benefits from FY17 and onwards.
Source; Burson Investor Presentation

Source; Burson Investor Presentation

  • The short term growth outlook is very positive. The company expects FY16 NPAT to come in around $41.5 million – $43.0 million. If achieved, this would represent annual earnings per share growth of between 24.5% and 29%.


  • The first obvious negative for investors is the current valuation. If the company delivers NPAT of $43 million, the shares are still currently trading on a price to earnings ratio of more than 28. This doesn’t leave much room for error if something does go wrong.
  • In order to fund recent acquisitions, the company has taken on more than $133 million in debt.
  • Burson’s retail segment does face competition from the likes of Supercheap Auto owned by Super Retail Group Ltd (ASX: SUL).
  • Some investors may be put off by the low dividend yield which is currently less than 2%.

Foolish takeaway

Just by comparing the pros (of which there were many more I could have included) and cons, it is pretty clear to see that Burson has a lot of attractive features going for it.

It is arguable whether or not the shares offer good value at the moment but I have little doubt that the shares will be worth significantly more in five years from now.

If you think Burson Group might be a little bit expensive for you right now, then you should consider these blue chip shares that have the potential to deliver some serious capital gains.

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Motley Fool contributor Christopher Georges has no position in any stocks mentioned. The Motley Fool Australia owns shares of Burson. 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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