Very often, when shares in a particular company are heading sharply higher it is because something new is happening at the business. Monitoring these new developments is an important part of what I do.
If you look at a long-term chart of shares in a small UK paper products company, James Cropper, you will see that for 23 years they traded in a range with a ceiling around 400p. Then in 2014 they broke through the top of the range and in a five year period the price has surged from under 200p to 1922p. The value of the business has risen since 2013 from £21.4m to £182.2m.
There is no way such a dramatic move could have occurred without something new and important happening at the business. If we are to understand whether shares in James Cropper are still a good investment we need to study the company and investigate the nature of these new developments.
First and crucial to all the positive things happening at the company is a new team at the top. This is often the case, when shares wake up in this dramatic way. The new team is led by Mark Cropper, a relatively young member of the founding family, who became chairman in October 2012 of a business, which was then in some difficulties.
He in turn appointed a new chief executive, Phil Wild, who had previously worked at 3M, a hugely successful and innovative US multinational, which is also in the QL Live Portfolio table (see Table Talk story). The new team at the top, which has since been joined by a whole cadre of talented senior and middle managers, then set about reinventing the business.
So far the most dramatic manifestation of the new strategy has been the success of TFP, the technical fibre products division, which produces such things as materials for fuel cell technologies, fire protection, aircraft primary structure solutions and supporting advances in key areas of defence. This business more than doubled profits in 2015-16 on the back of a large expansion in capacity and generally has been so successful that it now makes almost two thirds of group profits even though it only represents 23pc of group sales and.
On the back of this success James Cropper now describes itself as ‘the advanced materials and paper products group’.
The company still sees big opportunities in more traditional paper products because paper packaging is so much more environmentally friendly than the increasingly derided plastic packaging. In the latest year, profits generated from paper products rose by 24pc to £3.2m.
Last and presently very much least though it may not stay that way is the fledgling 3D printing business. Last year this business had minimal sales and lost £426,000. In a recent positive trading update the group said that commercialization of the 3D products business, in particular a type of very colourful next generation moulded paper packaging remained on track.
James Cropper is a classic 3G stock (great story, great growth, great chart), which is being transformed by new dynamic management exploiting exciting new business opportunities. It is no wonder the shares are shooting higher and the exciting journey may still be early days; that is certainly the view of the team at the top.