To me, it looks like a bull market may gather momentum for UK growth stocks.
I can feel it in my water, as my grandad used to say!
General economic conditions appear to be improving, and circumstances may be shaping up well to support progress for businesses and shares.
So I’m working hard to identify promising UK growth stocks for my portfolio.
Robust earnings
For example, in March, Luceco (LSE: LUCE) released a reassuring set of full-year results. The company supplies wiring accessories, electrical vehicle (EV) chargers, light-emitting diode (LED) lighting, and portable power products.
“Profitability at the upper end of expectations despite challenging markets. Continued growth and strong cash generation”, the report trumpets.
Meanwhile, the figures show revenue up by 1.3% during 2023 and basic earnings per share higher by just over 50% — impressive!
The directors said the strong performance of the business continued into 2024, and the order book is ahead compared to a year earlier.
Chief executive John Hornby is upbeat about the outlook. Several “exciting” product developments are in progress providing good medium- and long-term opportunities for growth. On top of that, the company is focused on its bolt-on acquisition strategy.
It recently bought a UK company called D-Line, the supplier of cable management solutions.
Hornby said D-Line’s product range is a natural fit alongside Luceco’s existing categories. The business has built up a strong brand in the UK and internationally. Hornby is “particularly excited” about using D-Line’s North America operation to support Luceco’s growing business there.
City analysts have pencilled in double-digit percentage advances in earnings for 2024 and 2025. So that qualifies Luceco as a growth stock even though it’s not guaranteed the company will make its estimates.
A fair valuation?
Meanwhile, the balance sheet looks robust, with just modest levels of net debt. But one of the biggest risks for long-term shareholders is that the business serves cyclical markets. So there may be plenty of volatility ahead.
One recent example is the apparent softening that seems to be happening in the EV market. Who knows how far that trend will go? If EV sales remain suppressed, the situation could affect Luceco’s growth strategy.
Nonetheless, the valuation looks reasonable given the robust estimates for earnings growth. With the share price near 150p (8 April), the forward-looking price-to-earnings multiple for 2025 is around 11. There’s also an anticipated dividend yield running near 3.6%.
I don’t expect the company to ever attract a racy valuation because of its vulnerability to general economic cycles. But despite the uncertainty, the dividend could be handy income to collect while waiting for the business to hopefully grow in the coming years.
For me, it’s a good time to double-down with deeper research into Luceco’s business. My aim would be to add a few more of the shares to my portfolio to hold for the long term.
The post 1 top UK growth stock to consider buying in April appeared first on The Motley Fool UK.
Like buying £1 for 31p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
See the full investment case
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Kevin Godbold has positions in Luceco Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
