2 UK growth stocks I’d buy in December

Edward Sheldon highlights two under-the-radar UK growth stocks he believes have big potential. Both look set to benefit from the online shopping boom.

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Growth stocks are popular right now. Not only are UK investors piling into London Stock Exchange-listed growth shares such as ASOS and JD Sports Fashion, but they’re also buying US-listed growth plays such as Tesla and NIO.

Here, I’m going to highlight two UK growth shares that I believe look attractive as we begin December. I think these two stocks – which are a little under the radar – have big potential in today’s digital world.

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This growth stock looks cheap

One UK growth stock I like the look of right now is Urban Logistics (LSE: SHED). It’s a real estate company that invests in strategically-located logistics warehouses. These warehouses enable e-commerce businesses to operate their distribution networks more effectively and get their goods to consumers more efficiently. With the UK e-commerce market projected to grow by more than 20% in the next four years, I see Urban Logistics as well positioned for growth.

A recent trading update from the company for the half to September was very encouraging. For the period, revenue increased 66% to £9.8m. Meanwhile, the group’s property portfolio increased 67% in value to £346m. The company also said that the UK logistics market is booming at present and that it “is extremely well placed” to benefit from this market backdrop.

Urban Logistics shares currently trade on a forward-looking P/E ratio of 15 using next year’s earnings forecast. I see that valuation as very attractive. I’d buy this growth stock today while it’s still under the radar.

Poised for growth in a digital world

Another UK growth stock I like as we start December is GB Group (LSE: GBG). It’s a tech company that uses advanced technologies such as machine learning to verify people’s identities. Currently, it has the ability to verify over 4bn people worldwide. In a world that’s becoming increasingly digital, GB Group looks well-placed for success, in my view.

A recent trading update showed that GB Group has performed well throughout Covid-19. For the six months to 30 September, total revenue was £103m, versus £94.3 last year. On a constant currency basis, organic revenues were up 10%. Turning to profits, GB said it expects to report adjusted operating profit of approximately £27m, a 26% increase on last year. It also advised that it intends to reintroduce its dividend.

GB Group has grown significantly in recent years. Over the last three years, for example, revenue has climbed 130%. While Covid-19 has slowed growth somewhat (the group expects full-year revenue to be flat to marginally ahead of FY20), I expect the company to continue growing at an impressive rate in the medium to long term. The boom in e-commerce and the global crackdown on fraud should provide tailwinds.

GB Group shares currently trade on a forward-looking P/E of about 40. That valuation does add some risk to the investment case. Overall however, I think the long-term risk/reward proposition is attractive. With a market-cap of just £1.6bn, I think there’s plenty of room for growth.

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Edward Sheldon owns shares in ASOS, JD Sports Fashion, and GB Group. The Motley Fool UK owns shares of and has recommended Tesla. The Motley Fool UK has recommended ASOS. 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.

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 considered, so you should consider taking independent financial advice.

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