For some companies, specialization is the path to success. For others, it is diversification. One fast-growing mid-cap that favors the latter approach is global consumer products distributor Jarden Corp. (NYSE: JAH).

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Thanks to a steady slate of acquisitions over the years, this company now has a diverse product portfolio of 120 leading brands. These range from Bicycle playing cards and Coleman camping equipment, to Sunbeam home appliances and Rawlings baseball gear. The company’s distribution channels are extensive as well, and include buying clubs, retail chains, mass merchants and direct-to-consumer channels (such as the Internet).

By continually adding top brands and broadening their sales channel exposure, Jarden has posted one the best expansion records of the past decade. Since 2005, sales have nearly tripled to $8.3 billion, and profits jumped nearly ten-fold to $0.98 per share. Not surprisingly, shares of the firm are crushing the market.

After such a steep run-up, it’s also no surprise that Jarden now sports a frothy price-to-earnings (P/E) ratio. At 57, it’s more than twice the stock’s five-year average of 27. While this could indicate that shares are topping out, I believe they still have market-beating gain potential in the coming 12 months, barring a protracted pullback in the broader stock market.

Why? In a word, acquisitions.

A Focus On Niche Leaders
Deal-making has long been Jarden’s main source of growth, and in the past few years the firm completed several major buyouts that should keep the forward momentum going. These include a $1.8-billion acquisition of the well-known scented candle maker Yankee Candle in 2013 and last summer’s $349-million buyout of Rexair Holdings, Inc., which is known for its Rainbow brand of premium vacuum cleaning systems. Last month, Jarden closed a $1.4-billion takeover of Waddington Group, a top manufacturer of disposable tableware for commercial and retail markets.

Although these deals may seem haphazard, they conform to a broader strategy of acquiring niche leaders with strong sales. Management invariably looks for ways to augment the acquired company performance. For example, management expects Waddington to boost overall earnings by 5% this year and contribute $800 million of revenue next year. Other projected benefits, which should begin to manifest by next year, include higher margins, greater cash flow and expansion in commercial markets such as foodservice.

Because it pursues the highest-quality acquisitions, Jarden has a history of solid long-term gains in key measures of financial strength. For example, the gross and operating margins have averaged about 29%, and 8%, respectively, since 2010, up from approximately 26%, and 6%, between 2005 and 2009. Comparing those two periods, average annual free cash flow rose by nearly a third to about $330 million, while the average amount of cash on hand more than doubled to almost $1 billion.

Recession-Resistant Products
Although Jarden is an aggressive dealmaker, many shareholders will appreciate the defensive nature of its business. As Seeking Alpha analyst Mark Lin recently observed, Jarden distributes many everyday household products that are “unlikely to go the way of buggy whips anytime soon.” Demand for these products — which include baby bottles, storage bags, sponges and numerous other staples — tends to be relatively stable, Lin also pointed out.

Jarden should therefore show decreased susceptibility to poor economic conditions, as it showed during the Great Recession of 2008 and 2009. Business receded in only one of those years, 2009, when sales fell by a mere 4% (to $5.2 billion). Yet the firm still posted solid margins and generated net income of $129 million — at the time, its best profit in several years.

What’s more, sales are up every year since. And profits, while choppy at times, are nearly 70% above 2009 levels.

Enhancing Returns With Leverage
Savvy use of debt is an important factor in Jarden’s outperformance, enabling management to make major acquisitions that typically generate returns well in excess of borrowing costs. Thus, shareholders should expect leverage to play a central role in company operations in the coming years.

That said, they shouldn’t turn a blind eye to Jarden’s debt load, which has nearly doubled to $5.1 billion from $2.8 billion in 2010. This warrants monitoring, since making debt payments could get difficult if the firm leverages up further and/or a sharp economic downturn hurts cash flow.

I’m not very concerned about this yet, though. Management has never been keen to overtax Jarden’s balance sheet, and they aren’t doing so now.

At present, Jarden has combined free cash flow and current assets (cash and other assets that can be quickly converted to cash) of more than $4.6 billion. This alone is substantially more than the roughly $3 billion of debt this is coming due over the next four years. Since free cash flow is usually robust and current assets consistently grow, covering future debts shouldn’t be a problem.

Risks To Consider: While Jarden’s business is recession-resistant, its stock could tumble if the economy sours. In 2008, when the financial crisis was raging, shares of the firm dropped by more than half.

Action To Take –> Jarden’s wide net and deal-making acumen bode well for future growth, and should enable the firm to comfortably reach current performance goals. These include growth rates of 3%-to-5% for revenue and at least 10% for earnings over the next few years — targets that could prove conservative as synergies with Waddington and other recent acquisitions emerge. Against this backdrop, the consensus target of $63 for Jarden’s stock — which implies roughly 15% upside in the coming 12 months — looks eminently doable.

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