My favourite FTSE value stock falls another 6% on today’s results – should I buy more?
My favourite FTSE 100 value stock used to be one of the most boring. I saw that as a virtue. It grew steadily, lifted dividends year after year, and over time the total return compounded into something special.
Its name? International distribution group Bunzl (LSE: BNZL). I saw it as the classic unsung hero, rolling up its sleeves and quietly getting on with the unglamorous task of building a business and creating long-term wealth for investors.
Bunzl sells everyday items businesses canât do without, from cleaning products to disposable coffee cups and rubber gloves. Like I said, itâs dull. But there was nothing dull about its aggressive acquisition strategy, snapping up rivals around the world and bolting them on to boost profits.
Bunzl share price struggles
I wasnât alone in admiring Bunzlâs discreet charm. Back in 2018, investment platform AJ Bell highlighted it as a FTSE 100 dividend hero, delivering a total return of 339% over a decade.
It has an exceptional dividend record too, lifting payouts every year for more than three decades. Over the last five years, they’ve climbed at an impressive annual average rate of 7.48%.
Then suddenly Bunzl stopped being boring, and not in a good way. On 16 April, the shares crashed 25% after a shock profit warning, alongside the suspension of its share buyback. Sales were hit by US tariffs and the loss of a major customer.
Iâve learned the hard way about rushing in after profit warnings. Shares may look cheaper, but after-shocks are common, as I discovered with Diageo and JD Sports Fashion.
So I held back, and that proved sensible. The shares are now down 38% over the last 12 months, with no signs of a recovery yet. Iâve taken my time and bought Bunzl on three separate dips. Today, the stock has dipped again.
FTSE 100 struggler
This morning, Bunzl said full-year revenues are expected to grow by 2% to 3% at constant exchange rates, in line with guidance. That hardly sounds disastrous, yet the shares promptly slumped another 6.5%, even as the FTSE 100 jumped 1.3%.
Markets have doubtless recoiled at the news that margins are set to slip to 7.6% across 2025, down from 8.3% in 2024, although the rate of decline should ease in the second half. The board said momentum could also improve in the final quarter, helped by performance initiatives and new business wins in North America. Growth in 2026 looks modest, though. In other words, a bit boring.
And thatâs fine by me. Recovery stories take time, which is why Iâve been building my position gradually. The US market remains fragile and the global backdrop isnât exactly buoyant. Any further missteps could send the shares lower still.
Bunzl looks great value on a price-to-earnings ratio of 11.43, and a solid trailing yield of 3.43%. Bargain hunters have already emerged. The shares have clawed back some of todayâs losses and are now down just 2.88%.
I still think theyâre worth considering, provided investors take a long-term view. Thatâs always the case with battered recovery plays like this one. Bunzl should bounce back, given time. Investors need a high boredom threshold though.
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Harvey Jones has positions in Bunzl Plc, Diageo Plc, and JD Sports Fashion. The Motley Fool UK has recommended Aj Bell Plc, Bunzl Plc, and Diageo Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
