UK shares to buy: this small-cap gem continues to exceed expectations

This business is doing well and has the potential to grow across all its divisions in the years ahead, making it one of several UK shares to buy for me.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

I’ve been keen on Harry Potter publisher Bloomsbury Publishing (LSE: BMY) for some time. I think it’s a quality enterprise and a UK share to buy.

Why I think Bloomsbury is a UK share to buy

The multi-year financial record has some reassuring figures. Operating cash flow has been generally rising. And the directors have used some of the incoming cash to keep the shareholder dividend rising. In short, I think the business is in good health.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

And today’s full-year results report to 28 February contains more good news. Chief executive Nigel Newton said a 22% year-on-year increase in pre-tax profit is “ahead of expectations.” 

To mark the occasion, the company is rewarding shareholders with a special dividend worth 9.78p per share on top of the full-year dividend declared at 7.58p — happy days for existing stock owners.

I reported last October the interim figures were ahead of directors’ earlier expectations. And I saw the stock as a decent buying opportunity. Back then, the share price was near 252p. Today, it’s around 337p and getting close to the all-time high achieved in the summer of 2005, near 370p.

Harry Potter remains important to the business

The earlier success of the business was driven by the phenomenon of the Harry Potter series. However, Bloomsbury has more strings to its bow than just J K Rowlings’ much-loved creations. For example, the company breaks its results down into figures for Adult Trade, Special Interest and Academic & Professional publishing, as well as the Children’s Trade division that includes the Harry Potter titles.

However, I’m not underestimating how important Harry Potter remains to the business. The Children’s Trade division produced around 40% of total revenue for the year and around 60% of overall operating profit.

Children’s Trade sales recorded “excellent” growth, increasing 26% compared to the prior year. And adjusted profit from the division before tax shot up by 42%. Within those figures, sales of the Harry Potter titles moved 7% higher than the previous year.

According to the directors, Harry Potter and the Philosopher’s Stone was the third bestselling children’s book of the year on UK Nielsen Bookscan. And Harry Potter and the Philosopher’s Stone, Harry Potter and the Chamber of Secrets and Harry Potter and the Half-Blood Prince were all Sunday Times bestsellers in the year.

I’d aim to buy for a long-term hold

So I’d be fooling myself if I believed Bloomsbury had moved away from heavy reliance on the series. And that’s one of the risks with the stock, as I see it. If Harry Potter declines in popularity in the future, we could see a big dent in the trading figures. And it’s some 23 years since the boy-wizard first helped the firm hit the big time.

Another risk now is that the pandemic appears to have boosted sales because of the wider uptake of reading. Perhaps that’s been related to the government’s lockdown and furlough policies leaving people with more time on their hands. The effect could reverse as the pandemic fades.

Nevertheless, despite a full-looking valuation, I think Bloomsbury is a UK share to buy for me on dips and down-days for the long-term. I think the business is doing many things right and has the potential to grow across all its divisions.

I'm also keen on this one:

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

Kevin Godbold has no position in any share mentioned. The Motley Fool UK has recommended Bloomsbury Publishing. 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.

More on Investing Articles

Social media and digital online concept, woman using smartphone
Investing Articles

Apple stock: Buffett is long, Burry is short. What should I do?

Our author thinks about whether following Warren Buffet into Apple stock might be a good addition to his portfolio –…

Read more »

Close-up of British bank notes
Investing Articles

5 ‘no-brainer’ dividend shares to buy today

Is there an easy way to narrow down the list of FTSE 100 dividend shares? I try one approach, with…

Read more »

Close-up of British bank notes
Investing Articles

£5,000 to invest? 2 dividend-paying penny stocks I’d hold to 2030

I think these high-yielding penny stocks could help cushion the impact of high inflation on my returns. Here's why I'd…

Read more »

Renewable energies concept collage
Investing Articles

2 green stocks that I think are no-brainer buys for the future

Jon Smith explains two of his favourite green stocks at the moment, one for growth and the other for income…

Read more »

An airplane on a runway
Investing Articles

The Rolls-Royce Share price may be set for take-off!

After an upbeat Civil Aerospace Investor Day, here's why I think the Rolls-Royce share price could be set for take-off…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

2 beaten-down growth stocks to buy as inflation rises

Despite inflationary pressures and recession concerns, I am looking at some top growth stocks to solidify my portfolio over the…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Is the IAG share price too good to miss at current levels?

Jabran Khan delves deeper into the current state of play with the IAG share price and decides if now is…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

5 of the highest-paying income stocks compared! Which one is best for my portfolio?

Income stocks are certainly in vogue right now amid sky-high inflation. But which of these big dividend payers is the…

Read more »