Pinned straw:
Motley fools take on this one from a month ago
Even after its recent run, this ASX company is showing no signs of slowing down.
Supply Network Ltd (ASX: SNL) has climbed around 17% for the year to date, while the S&P/ASX 200 Index (ASX: XJO) is down nearly 4% over the same period.
Yesterday, it reached an all-time high of $38.61.
This comes after the Supply Network share price doubled in 2024.
Over 5 years, the journey is even more impressive, with its share price up almost 1,000%!
So, what's behind this trajectory, and can it continue? Let's investigate.
Founded in 1976, Supply Network sells aftermarket truck and bus parts in Australia and New Zealand through its network of Multispares branches. The majority of growth over the past decade has been in its dominant truck parts business, which it sources from leading European, American and Japanese suppliers. The company boasts over 20,000 customers. It also has low customer concentration, with its largest customer contributing less than 4% of revenue.
While this might not sound like the world's most exciting business, the industry tailwinds behind it might surprise you. This includes Australia's ageing truck fleet, with the average truck nearly 15 years old. Trucks have also become increasingly complex, with up to 30,000 parts per vehicle, fuelling strong demand.
Supply Network's financials are hard to fault.
It has an impressive track record of profitable growth. In the most recent half, revenue increased 18% to $171 million, while NPAT soared 32% to $20 million. It also offers an attractive dividend yield of 1.73%, and its return on equity (ROE) has been as high as 40% in recent years.
Taking a longer view, its 10-year revenue compound annual growth rate (CAGR) sits around 14%.
While management has stated that growth is likely to moderate towards this long-term average, I wouldn't be surprised if this forecast was a little conservative. Here's why.
If there's one ASX management team I wouldn't bet against, it's Supply Network. With a history of underpromising and overdelivering, this team knows how to get things done.
They do it by flying under the radar, with a 'no frills' approach to investor communications. While many other ASX companies opt for glossy presentations, Supply Network is known for its basic communications format and rarely gives investor presentations. This is how they've managed to stay under the radar for so long.
CEO Geoffery Stewart (no relation!) has been at the helm since 1999, leading a team that consistently beats its own targets. The recent period was no exception, with management hitting their 3-year revenue target 18 months early.
Management has now set a new 3-year target to deliver $450 million in revenue by FY2028.
Based on their track record, I'd say there's a high chance they'll surprise investors once again.
While the market faces several headwinds, this ASX company has continued to power on.
Supply Network is arguably one of the highest-quality companies on the ASX. With a strong track record and an outstanding management team, it might be worth having a closer look at this under-the-radar ASX company.
Disclosure Held in Strawman and IRL
Aha, one of my worst stories. I did a screen search and found this one years ago. I knew nothing about it, but the numbers were very good, and I noticed their AGM was in a couple of weeks out past Fairfield, so I thought I'd go. It was during a C19 break. I met the management and had a chat with them. It was a typical small, well-run, family small-cap with a good culture. There was a Teaminvest guy there (who obviously had done the same screen as me), and a finance guy who recognised me and gave me the spiel as well. i had one question for the Chairman: what's your TAM?-- he didn't know. i fretted that I'd buy it just as TAM was saturated. not to be, they grew like topsy. The final piece i noted was that the finance guy has now become the chairman, and in his first letter, he is letting everyone know how big the TAM is! ---of course, the next one i buy will exhaust TAM straight away! lol.