The Motley Fool

UK shares: should I buy Dr Martens and Halfords?

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.

Image of person checking their shares portfolio on mobile phone and computer
Image source: Getty Images.

Well-known UK brands Dr Martens (LSE: DOCS) and Halfords (LSE: HFD) have both published annual results today. The market reaction to the numbers from these UK shares is mixed. The Dr Martens share price is down nearly 10%, while Halfords is unchanged.

Both companies appear to have traded strongly during the last year. But it looks as though the outlook for the year ahead may be less certain. Should I consider buying these shares today, or are these popular stocks already fully priced?

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Dr Martens: profits up 34%

Today’s numbers are the first set of results from this popular fashion footwear brand since its IPO in January. The headline figures look impressive to me. Sales rose by 15% to £773m, while adjusted pre-tax profit was up 34%, to £151.4m.

The group’s underlying operating profit margin for the year was an impressive 25%. This suggests to me that the Dr Martens brand still has strong pricing power. That’s a feature I look for when I’m investing in consumer stocks.

Dr Martens shares are trading at a price of about 450p, at the time of writing. Last year’s earnings came in at 11.6p per share, so this UK share is valued on around 39 times earnings.

To justify paying this much for DOCS shares, I’d need to be confident the strong growth seen last year will continue. Broker forecasts suggest sales could rise by 17% this year, driving a 40% increase in earnings.

That would be impressive, but I’m not sure how sustainable this rate of growth might be. My concern with this business is that it’s only just been floated on the public markets. In situations like this, I always ask myself why the private equity owners chose to sell — what do they know that I don’t?

On balance, I think that Dr Martens’ share price is probably high enough at the moment. I’d like to learn a bit more about this business before deciding to invest, so I won’t be buying just yet.

Halfords: a top UK retail share?

Lockdown living caused demand for bicycles to surge last year. Halfords’ revenue rose by 14% to £1,292.3m during the year to April, while the firm’s pre-tax profit climbed 72% to £96.3m.

This growth was driven by a 54% increase in like-for-like sales of cycling equipment, which easily offset a 12% drop in motoring-related sales.

I wouldn’t normally expect this kind of growth from a large, store-based retailer. But even before the pandemic, CEO Graham Stapleton was doing a good job of positioning Halfords to take advantage of trends such as electric bikes.

Stapleton says sales growth has remained positive this year and he expects to continue gaining a bigger share of the market. However, serious supply shortages of some cycling products mean that stocks are lower than usual, which could limit growth.

The company also says it’s hard to predict a return to normal trading patterns, given the ongoing Covid-19 restrictions in the UK.

Broker forecasts suggest Halfords’ earnings will fall over the coming year, returning to more normal levels. That puts this UK share on 16 times forecast earnings, with a dividend yield of 2.2%. I don’t see much obvious value here, so this is another situation where I’ll be staying on the sidelines.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story.

In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.