MENU

Is this the best mid-cap growth stock on the ASX?

There are few shares on the ASX that have done as well on the ASX over the past five years as Reece Ltd (ASX: REH), its share price has risen by 163%.

It has done remarkably well thanks to a long-term mindset from management, with the Wilson family running the company for decades.

Everyone knows it as a leader of plumbing and hardware stores, but it now also generates revenue from HVAC-R, civil, irrigation and pools.

Last month the company announced that it would be acquiring MORSCO Inc in the US for $1.91 billion. It’s a distributor of plumbing, waterworks and heating & cool equipment in 16 US states. Reece expects that this will deliver mid-high single digit EPS accretion in the first year.

Today, Reece announced another acquisition, although this one is a lot smaller.

It’s acquiring New Zealand plumbing business Edward Gibbon and the Zip Plumbing Plus stores in Christchurch and Takanini. Edward Gibbon has 10 stores across the two Kiwi islands.

New Zealand has a $7.1 billion hardware and building supplies industry, so this shouldn’t be thought of as a small opportunity for Reece.

CEO and Managing Director Peter Wilson said “The acquisition extends Reece Group’s New Zealand branch network from 18 to 30 stores that supply trade and retail customers with plumbing, bathroom and HVAC-R products and equipment.”

Under the agreement, the existing management will remain in place whilst Reece will implement any logical synergies between the businesses in the future.

Foolish takeaway

The deal is likely to complete near the end of July, after the MORSCO acquisition is due for completion. This seems like a decent bolt-on acquisition for Reece and allows it to expand in the small, yet important, market of New Zealand.

The large US acquisition makes me a bit nervous, but it also offers a lot of growth potential. I’d be happy to make a small purchase at the current price and buy more on any price weakness.

Don’t think Reece is the best mid-cap growth stock? These other stocks are also great candidates as the best growth ideas on the ASX.

4 Stocks for Building Wealth After 50

Renowned investor Scott Phillips just released a brand-new report detailing his 4 favorite stocks to buy right now.

And I don’t know about you, but I always pay attention when some of the best investors in the world give me a stock tip.

This is your chance to get in at the very beginning of what could prove to be very special investments.

Click here to get started today!

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. 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 Scott Phillips.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!