Plenty of top UK growth shares are soaring right now. Just look at Clipper Logistics, which I tipped as a growth share for August. It’s risen about 25% in a month.
Here, I’m going to highlight two UK growth shares I like for September. I believe both have the potential to deliver strong returns to investors over the medium to long term.
Recently, I worked on a large survey of financial services firms. I can’t give you any details about this project, unfortunately. However, what I can tell you is that the vast majority of firms surveyed said they’re looking to upgrade their digital infrastructure in the near term. Ultimately, Covid-19 has been a massive wake-up call in regards to the importance of digital transformation.
One UK growth share that should benefit from the digital transformation drive is Softcat (LSE: SCT). It’s a FTSE 250-listed company that offers technology solutions and assists organisations with their IT infrastructure. It helps organisations sort out their IT networks, cybersecurity, cloud migration, data analytics, and collaboration tools – all of which businesses are focusing on post-Covid-19.
Softcat issued an encouraging trading update in August. It said it’s continued to trade satisfactorily during the final three months of the year and that it’s delivered operating profit for the full year slightly ahead of the board’s expectations. It also said it’ll resume its normal dividend policy. This suggests the company has momentum right now and management is confident about the future.
Softcat shares aren’t cheap. Currently, the stock’s forward-looking P/E ratio is about 34. I wouldn’t let that valuation put you off, however. The long-term trend here appears to be up. And, as they say, the trend is your friend. I see this UK growth share as a ‘buy’.
Data is the new oil
Another UK growth share I like for September is First Derivatives (LSE: FDP). It’s a leading provider of big data analytics. Its clients include big banks, pharmaceutical companies, and telecommunication firms.
First Derivatives has grown at an impressive rate in recent years (three-year revenue growth of 57%) and a trading update in July showed the company has continued to make progress throughout Covid-19.
For the four months ended 30 June, revenue was up 6% on the year before with software revenue up 8%. The company said it remains “strategically well-placed” and that it’s encouraged by the growing demand for its streaming analytics from potential customers and partners.
After a really strong run in 2017 in which the stock got a bit ahead of itself, FDP has underperformed since mid-2018. However, it now looks like the stock is regaining some mojo. After falling during the Covid-19 crash, it’s recovered to near its 2020 highs. I think there’s a good chance the stock will continue to rise in the medium to long term as demand for the company’s data analytics continues to grow. After all, they say data is the new oil.
The forward-looking P/E ratio here is about 42, using next year’s earnings forecast. That’s not cheap. But for a high-growth data stock, it’s not unreasonable, in my view. I’d buy this UK growth share today.
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Edward Sheldon owns shares in Clipper Logistics, Softcat and First Derivatives. The Motley Fool UK has recommended Clipper Logistics and Softcat. 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.