I reckon this is one of the best UK shares to buy now

To me, the setback induced by the coronavirus pandemic makes this one of the best UK shares to buy now based on the potential of the underlying enterprise.

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If you’re searching for the best UK shares to buy now, there are many great FTSE  companies to choose between. But I’d consider this fast-growing small-cap stock because of its potential.

Long-term growth drivers

AB Dynamics (LSE: ABDP) designs, manufactures and supplies advanced testing systems and measurement products to the global automotive market.  Growth has been brisk and the company has an impressive multi-year record of rising revenue, earnings, cash flow and shareholder dividends.

The stock has done well but now sits around 40% below its previous highs because of the coronavirus pandemic. There’s been a hit to business this year and the directors cancelled the interim dividend. They also withdrew forward guidance because of the uncertainty thrown up by Covid-19. Such actions have been common among many companies this year.

In April, with the half-year results report covering the period to 29 February, the company revealed more blistering growth figures. But it also warned there had been a “material” reduction in order intake and a “deferment” of some large orders because of the pandemic.

However, in April, there was a net cash pile of just over £35m, which compares well to the market capitalisation near £386m. The cash should help the business survive the crisis and support the company’s “investment requirements.”

Looking ahead, the directors reckon long-term regulatory and structural growth drivers support  AB Dynamics’ growth prospects. And I reckon the shift to electric vehicles is helping to fuel the trend. Meanwhile, lockdowns have been easing around the world and the automotive industry has proved its ability to function alongside the virus.

I think the return of some stability in the sector reflects in the consolidation of the share price over the past three months or so. Meanwhile, City analysts appear to be optimistic about a bounce-back in earnings next year.

Short-term headwinds

It’s true that companies are hard to value right now when immediate trading is uncertain for many businesses. And AB Dynamics could be vulnerable if a worldwide economic slump gains traction, perhaps because of another flair up in Covid-19 infections. However, on balance, I see the stock as attractive right now.

The company has carved out what looks like a well-protected niche in the industry. And, prior to the pandemic, the operating margin had been running just above 12%. Meanwhile, the compound annual growth rate for earnings was just above 28%. Growth had been both organic and through acquisitions.

There’s no doubt the company enjoyed strong performance before the crisis, and the stock became something of a market leader. Indeed, the proven growth story caused the valuation to re-rate higher and we’ve become used to seeing the market assigning a premium valuation to the company. But I wouldn’t let a robust rating put me off buying some of the shares now – this is a high-quality enterprise.

I reckon the set-back induced by the pandemic makes AB Dynamics one of the best UK shares to buy now, based on the potential of the underlying enterprise.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kevin Godbold has no position in any share mentioned. The Motley Fool UK has recommended AB Dynamics. 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.

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