I think it’s one of the highest-quality businesses I’ve seen. But it’s down 34.72% in the last 12 months – and I’m interested.

What’s the company?

The stock in question is Broadridge Financial Solutions (NYSE:BR). The company does two things.

The first is managing things like proxy votes for companies. In this context, it connects businesses with brokers and shareholders.

The second is providing the software that facilitates securities trading. This connects banks that want to make trades.

In both cases, the company acts as an intermediary. But bypassing the firm is much easier said than done. Broadridge the easiest way for firms to comply with SEC and FINRA regulations. And its scale means it’s also the cheapest.

A quality business

I think Broadridge is one of the best businesses I’ve looked at as an investor. One reason for this is the firm’s economic properties.

Its average return on equity over the last 10 years has been 38.69%. More importantly, over 100% of its net income becomes free cash flow.

Source: Fiscal.ai

The key to this is the firm’s competitive position. As well as value and convenience, it has other important advantages. Both parts of the company are protected by high switching costs. And that leads to retention rates of around 98%. 

This is incredibly impressive. So the obvious question is why is the stock currently trading at decade-low multiples? 

Why is the stock falling?

It’s hard to pin down a single reason why the stock is down 41.41% from its highs. But there are a few related factors. 

One is the company’s recent infrastructure investments. And another is a 27% decline in event-driven revenues.

These aren’t existential threats. But both are ongoing challenges that investors will need to keep an eye on in the future. 

They’re the kind of issues that can have a big impact on a stock trading at a P/E ratio of 36. That’s where Broadridge was a year ago. At today’s levels, however, I think it’s a different story. And that’s why I’m looking at what could be a rare buying opportunity. 

A once-in-a-decade opportunity

I’ve had my eye on Broadridge for some time. But I’ve never been willing to buy the stock at the prices it’s been trading at.

I haven’t, however, had the chance to buy it at a P/E ratio of 17. And I think it might well be too cheap for me to pass up. 

Source: Fiscal.ai

At today’s prices, the implied long-term growth rate for a 9% annual return is 2.81%. That’s well below analyst forecasts. 

Earnings per share are expected to grow by at least 9.63% a year until 2029. If that’s even close, there’s a margin of safety for investors.

Source: Nasdaq.com

Can the stock fall further? Absolutely, but at today’s prices, I think the potential opportunity looks pretty compelling.

Buying the dip

A lot of S&P 500 stocks have been falling, especially in the tech sector. But Broadridge isn’t about the threat of AI. I think it’s a quality business that’s dealing with some short-term pressure. But at a P/E multiple of 17, I’m looking to buy.

The post A once-in-a-decade chance to buy these S&P 500 shares? appeared first on The Twelfth Magpie.

When it comes to growth stocks, the headlines have been taken by big US tech firms. And rightly so – the likes of Nvidia and Microsoft have achieved spectacular results recently.

It’s not just companies in the artificial intelligence race that have strong growth prospects, though. I think there are some interesting opportunities elsewhere at the moment.

Rightmove

Rising interest rates have been a real dampener for the Rightmove (LSE:RMV) share price. Despite a 25% increase in sales, the stock is still roughly where it was five years ago. 

The main reason is that interest rates have gone from below 1% in 2019 to above 5% recently. That’s made borrowing more expensive and caused demand in the property market to slow.

The biggest risk for Rightmove is the possibility of this continuing. Inflation reached the official 2% target last month, but the Bank of England seems reluctant to bring rates down.

There are some positive signs, though. Lenders have been finding ways to offer mortgages with lower deposit requirements, causing house prices to hold up well.

In addition, both the Conservatives and Labour are promising to invest in housing after the election. This should mean strong demand for the UK’s largest online property platform.

Rightmove’s share price has struggled recently in an environment where interest rates have been higher. But now might be the time to consider buying the stock for what comes next.

Broadridge Financial

US-listed Broadridge Financial Solutions (NYSE:BR) probably isn’t on the radar of many UK investors. But I think it’s a really interesting stock that could be a great investment.

The business distributes investor materials to shareholders for other companies. This is something they could do themselves, but it’s time-consuming and expensive.

Broadridge’s scale means it can do this at a fraction of the cost. With the need for investor communications unlikely to go away, it has a dominant position in an important industry.

That’s a powerful combination. However, despite the stock being down since the start of the year,  a price-to-earnings (P/E) ratio of 33 means there’s a clear risk for investors.

The company’s competitive position gives it good scope for growth, though. The most conservative analyst estimates expect earnings per share to reach $9.20 by 2026.

If that happens, the current share price implies a P/E ratio of around 21. Based on this, I think the stock looks like one to consider for investors looking for long-term returns.

Long-term investing

The best time to buy stocks is often when investors are looking the other way. And I think this is the case with Rightmove and Broadridge at the moment.

With Rightmove, lower interest rates are the key to future growth. This should benefit both the share price and the underlying business. 

In the case of Broadridge, the business is less cyclical. Its dominant position should allow it to grow its earnings through gradual price increases, sending the stock higher as a result.

The post 2 top growth stocks to consider buying in July appeared first on The Twelfth Magpie.