Kitwave (LON:KITW): quality management and growth potential

Summary

Wholesaler Kitwave (LON:KITW) specialises in supplying frozen, chilled and ambient goods to convenience stores and foodservice businesses across the UK.

The group floated on the AIM market in 2021 and continues to be run by founder Paul Young. The shares score well for quality and momentum factors but remain reasonably priced, in my view. I think this business has considerable growth potential and recently added the shares to my SIF Folio.

Bull points:

Strong record of buy-and-build growthHigh ROCE and good cash generationExperienced owner-managementReasonable valuationBear points:

Significant exposure to a few large customersExposed to macroeconomic headwinds in foodserviceAcquisitive model could go badly wrongProfile

About the stock

Kitwave operates in the Consumer Defensives sector and is part of the Food amp; Drug Retailing industry group.

The group floated on the AIM market in 2021 and the stock has recently traded at 290p, giving a market cap of £202m. Liquidity is reasonable for a small cap, with a 73% free float and recent average volumes of c.300k shares per day – about £900k.

The StockRanks show high quality and momentum...