The All Ordinaries Index (ASX: XAO) is up a healthy 0.7% on Friday, but this ASX All Ords stock is leaving those gains in the dust.
The Big River Industries Ltd (ASX: BRI) share price is up 9.7% in late morning trade, with shares currently changing hands for $1.64 apiece.
And if Sebastian Evans, chief investment officer of Naos Asset Management, has it right, there could be a lot more outperformance to come from this ASX All Ords stock.
Image source: Getty Images
ASX All Ords stock positioned for big potential earnings growth
Addressing the difficult market conditions for ASX small-cap shares over the past year, Evans said "Equity markets tend to look three to six months ahead, so now is arguably the time when investors should be considering which emerging companies to invest in."
When asked which company his fund holds that's the most undervalued by the market, he turned to ASX All Ords stock Big River Industries.
According to Evans (courtesy of The Australian Financial Review):
Many of our investments are trading on price-to-earnings [P/E] multiples of less than 10 times, but if I were to pick just one, it would be Big River Industries.
The 100-year-old business is one of the last remaining building materials-related businesses that is still listed on the ASX after others like CSR have been acquired.
BRI is a nationwide distributor of building materials with a particular focus on high-value timber panel products. While the macro backdrop is not ideal, given Australia's very severe housing shortage we expect BRI will be a major beneficiary as this issue is addressed.
With today's big share price surge, the ASX All Ords stock is trading on a P/E ratio of 8.1 times.
At its half-year results (H1 FY 2024), Big River Industries reported statutory earnings of 8.5 cents per share. That was down 45.5% from 15.6 cents per share in H1 FY 2023.
John Lorente, Big River CEO, said it was a "solid results, in a challenging macro environment as we continue to invest in the business for future growth".
And it's with future growth in mind that Evans believes Big River Industries could double its earnings per share by FY 2027.
"The company has been executing on a consolidation strategy, which has many years of runway in an industry dominated by Baby Boomer business owners," Evans said.
"In our opinion, there is no reason to think that BRI could not double its earnings per share by FY 2027."
Don't forget the dividends!
Atop the potential for doubled earnings growth, the ASX All Ords stock also has a history of paying out some juicy dividends.
The company paid a final fully franked dividend of 8.5 cents a share on 6 October and an interim dividend of 5.5 cents a share on 27 March.
That sees Big River Industries trading on an 8.5% fully franked trailing dividend yield.
The company is scheduled to release its full-year FY 2024 results on 22 August.
With today's intraday boost factored in, shares in the ASX All Ords stock remain down 33% over 12 months.
