Image source: Getty Images
A key part of my investment strategy is to look for stocks that can grow and deliver consistent and profitable returns over the long term. One growth stock I have my eye on. A safe place Should I buy or avoid (LSE:Safe) shares?
Self storage and storage
Safestore is a self-storage business that provides parts warehousing services to consumers and companies. In fact, it is the largest operator of its kind in the UK, and has a global presence with sites in France, the Netherlands and Spain.
At current levels, Safestore shares trade for 919p. They were down 14% in the 12-month period when they traded for 1,078p this time last year.
With the explosion of e-commerce requiring more warehouse space, as well as the ever-increasing housing market, warehousing and warehousing businesses have performed well lately. According to Statista.com, this trend is expected to continue, which is why I’m considering Safestore as a major player and growth stock.
Future challenges
One challenge that could have a detrimental effect on Safestore shares is the developing market. Many organizations are racing to turn the growing demand for storage solutions into profits and growth. Additionally, there are lower barriers to entry into the storage market which may invite other players who may eventually cut in and overtake Safestore and others.
I also noticed that Safestore has had a lot of success in recent years due to the pandemic as well as the booming housing market. This has increased demand. The current economic outlook and cost of living crisis may result in weak demand in the short term. This can affect the investor’s sentiment, without increasing performance and returns.
The case of the bull and my judgment
So let’s look at some of the positive aspects of Safestore shares. I will start with the history of the performance. I know that past performance is no guarantee of future. However, when I look back, I can understand that for the last four years, it has recorded revenue and gross profit. If the demand for storage space is set to continue to grow, it will likely continue this trend.
Next, Safestore shares will grow my passive income stream through dividend payments. The current dividend yield is 2.7%. This is high FTSE 250 The average is 1.9%, but I know that dividends can be canceled at any time.
Finally, the shares currently look dirt-cheap at a price-to-earnings ratio of more than four. This tells me that if performance and returns increase, the share price will likely follow.
In conclusion, the favorable market conditions, the belief that the demand for self-storage will only increase, as well as the possibility of income, helped me to make my decision. I would be willing to buy Safestore shares for my holdings.