Things have been a bit stagnant on the FTSE 100 lately, with the index slipping almost 3% in the past month. Now, I’m looking further afield for lesser-known but promising UK shares for my Stocks and Shares ISA next year.
I often find when times are tough, the little guys come out of the woodwork and start to shine.
Here are two that I think could enjoy decent growth in the coming years — if the economy plays ball!
Trainline
Trainline (LSE: TRN) is a digital ticket booking service that’s gone from strength to strength recently. The share price has surged an impressive 41.5% over the past year. Not bad for what is essentially a train and coach comparison site, helping users find the most cost-effective or time-efficient journey anywhere in the EU.
I remember when it was just a small UK train booking site called thetrainline.com. It rebranded to just Trainline in 2016 before expanding across Europe and going public in 2019. Things were a bit rocky at first but in recent years it seems to have found its feet (or rails).
The company now sports a meaty £1.85bn market cap and revenue of £114.5m as of August this year. It has a strong net profit margin of 14.8% and earnings per share (EPS) that climbed 300% year on year.
On the downside, the high price means it also has a high price-to-earnings (P/E) ratio of 32.8 — far ahead of the industry average of 22.8. That makes further growth less likely. Other risks that threaten profits include travel restrictions and competitor apps, particularly from low-cost alternatives like budget airlines. On average, train travel remains relatively expensive compared to short-haul flights.
Still, recent performance suggests it must be doing something right, so it’s firmly on my list of ISA options for 2025.
XPS Pensions Group
XPS Pensions Group (LSE: XPS) is a British pension consultancy firm providing a variety of services focused on pensions, investment consulting and administration.
The main reason I like it is the slow but stable growth. I’m a big fan of investments I can forget about for years without worry. Plus it has a 2.8% yield — although it only recently started paying dividends so reliability isn’t certain yet.
The second reason I like it is the solid balance sheet, with low debt and sufficient interest coverage. It has a high net profit margin of 27.2% and a high return on equity (ROE) of 29.1%. Plus, at 14.5, its P/E ratio has been reducing for some time.
However, one recent development concerns me. The co-CEO and Director Ben Bramhall recently sold 51% of his shares at slightly below the current price. It’s impossible to say exactly why — maybe he needed the money — but it’s a risk nonetheless. If an insider sells, we have to wonder if they know something we don’t!
Looking ahead, revenue is forecast to grow by 12% in the next year while earnings are forecast to decline by around 10%. This won’t necessarily affect the share price but it could limit growth.
With steady growth and a good dividend yield, I’m happy to put it on my list of potential ISA additions for next year.
The post 2 promising British value stocks I’d consider for a Stocks & Shares ISA next year appeared first on The Motley Fool UK.
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Mark Hartley has no position in any of the shares mentioned. The Motley Fool UK has recommended Xps Pensions Group Plc. 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.
