Should I Buy Bunzl?

LONDON -- It's time to go shopping for shares again, but where to start? There are loads of great stocks to choose from, and I've got my wallet out. Should I buy Bunzl (BNZL -1.10%)?

Bunzl of fun
Specialist distribution group Bunzl isn't exactly the showiest stock on the FTSE 100, but it has a big global company with interests across the U.S., U.K., Europe, Australasia and South America. It is in the unglamorous trade of supplying businesses with a range of not-for-resale goods, such as food packaging, first aid products, point-of-purchase displays, catering equipment, stationery, bags, safety equipment, cleaning supplies and health care consumables such as face masks, wipes and swabs. By outsourcing these mundane tasks, it allows its clients to focus on their core businesses and free up working capital. Bunzl is a solid, behind-the-scenes operation, and has plenty to recommend it...

Clean and lean
... Like robust diversification, which has helped it shrug off struggles in the U.K. and Ireland. Bunzl has been building on this by spreading into new markets such as Italy, northern Europe and Chile, and making regular acquisitions. It snapped up nine companies in 2012, bringing in total annual revenue of 210 million pounds. Bunzl has further protected itself by diversifying across groceries, food services, cleaning and hygiene, safety, non-food retail, hygiene and redistribution.

Bunzl isn't the type of company to boast, but if it did, it would be bragging about its strong cash flow and healthy balance sheet. It would also point to its progressive dividend policy, with the payout recently increased by 9%. Yet it isn't a dividend monster, currently yielding 2.3%, covered 2.6 times, well below the FTSE 100 average of 3.5%. Its operating margin of 5.5% is characteristically solid, but not spectacular. That's the kind of attribute the market admires these days, which explains why Bunzl is trading at an above average valuation of 17 times earnings. Earnings per share growth is also a steady as it gets, 3% last year, 6% this and 7% in 2014, although management did recently suggest growth may slow, notably in the U.S., where it earns half its revenues.

Mopping up
After several years of solid growth, Bunzl had a bit of a wobble in the last couple of months of last year, but it has come back strongly in recent weeks, helped by broker Numis hiking its target price from 12.48 pounds to 15.05 pounds and retaining its buy recommendation. It currently trades at 11.64 pounds, which gives scope for some growth. Given Bunzl's defensive qualities and rising dividends, it looks like a decent long-term buy and hold. Especially if a spot of market volatility trims that valuation.

But we have spotted a much better growth opportunity elsewhere on the FTSE 100. Our share analysts have scoured the stock market and decided this is the single best U.K. growth stock of this year. We are so impressed, we've named it "Motley Fool's Top Growth Share for 2013."

If you want to know what company it is, and why we think it is set to grow so strongly, simply download our free report. It won't cost you a penny, so click here now.