Should I buy these UK shares after today’s updates?

These two UK shares have risen strongly after releasing new financial statements. Here’s why I’d buy one today and leave the other on the shelf.

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The Sopheon (LSE: SPE) share price has detonated on Tuesday following the release of fresh financials. At 960p per share this UK tech share was last trading 9.1% higher on the day.

Sopheon — which provides enterprise innovation management (EIM) solutions that allow managers to effectively monitor and use data — said that revenues jumped 19% year-on-year in the first half to $16.5m. In addition, it said that recurring revenues improved by a fifth over the period as attempts to migrate to a software-as-a-service (SaaS) model business paid off.

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As a result adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) at Sopheon rose 8% year-on-year. Trading at the business is improving rapidly but I’m afraid I won’t be buying this share any time soon. Its forward price-to-earnings (P/E) ratio of 842 times is gargantuan and could prompt a severe share price correction if sales don’t keep rising at an electrifying rate. The EIM market is growing rapidly but the company faces intense competition from industry heavyweights like IBM and SAP.

A better buy?

The Grafton Group (LSE: GFTU) share price has also risen following the release of its own market update. At £13.44 per share the UK retail share was trading 2.7% higher on Tuesday. It struck record highs around 10p higher earlier in the day.

In its half-year financial statement, Grafton — which supplies building materials and DIY products through a wide variety of retail brands — said that revenues rocketed 46.1% in the first half of 2021, to £1.03bn. This in turn drove pre-tax profit to £142.9m, up a whopping 384.8% from a year earlier.

The bottom line also benefitted from a significant year-on-year improvement in operating margins. Stripping out property profit these jumped to 13.9% from 6.7% previously. And pleasingly cash generation at Grafton also clicked through the gears between January and June. This resulted in net cash of £302.5m on the balance sheet at the end of the half, up around £245m from June 2020 and giving the company plenty of financial strength to pursue its M&A-led growth strategy.

Why I’d buy this UK share

I think Grafton Group is a top UK growth share to buy today. City analysts think earnings here will rocket 67% during 2021, a bold estimate that doesn’t surprise me for a number of reasons. The construction market is booming and should continue to improve as the economic recovery clicks through the gears, keeping demand for Grafton’s products bubbling nicely. It’s a trend which the company’s healthy appetite for acquisitions should help it to exploit to the fullest too.

Speaking of which, I’m also encouraged by Grafton’s attempts to expand its geographical footprint to boost profits growth (its most recent purchase in July saw it enter the Finnish market by acquiring IKH). Today the FTSE 250 firm trades on a forward price-to-earnings growth (PEG) ratio of just 0.3. This sits well inside the widely regarded bargain benchmark of 1 and below. While supply chain problems could blow current forecasts off course, I think this UK share could still be too cheap to miss.

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Royston Wild 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.

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