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The UK growth share I’d consider buying even at an all-time high

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Sports retailer JD Sports (LSE: JD) impressed the City with its interim results yesterday, with the UK growth share touching a new all-time high. Even at the elevated JD Sports share price, I’d consider adding it to my portfolio. Here’s why.

The growth story at JD Sports

As I’ve outlined before, there’s a strong growth story at the company. It understands retail excellently, has a powerful online — as well as bricks and mortar store – – presence and has been aggressively expanding internationally.

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That combination of factors continues to work well for the company, as its results showed. Revenue, gross profit margin, profits, earnings per share and cash on hand all rose compared to the equivalent period last year. That period included the onset of the pandemic, so a direct comparison is difficult. But nonetheless, the results are storming.

Take the revenue figure as an example. At £3.8bn, not only is it 52% above last year’s interim level. It’s also a massive 43% higher than the pre-pandemic 2019 numbers for the same six month period. JD is a growth machine and the results suggest that it may have come out of the pandemic even stronger than it went in.

Why I like this UK growth share

What could that mean for me as an investor? On one hand, I think the shares look expensive on the surface. They sit at an all-time high, with a price-to-earnings ratio in the 30s. On the other hand, if JD can continue to grow as it has been doing, I think the valuation will look increasingly comfortable. With an eye on the prospect of sustained strong future performance, I don’t think the current JD Sports share price looks costly.

I think the company has a winning formula and proven ability to execute it. It has proven itself able to incorporate some potential risks, such as the rise of online retail, into its own growth strategy.

JD Sports share price risk

That doesn’t mean that there aren’t risks, though. Take its international expansion as an example. Opening up in overseas markets brings expenses and adds complexities, especially at a time when global supply chains are already stretched. Local competition could mean lower profit margins than in JD’s existing markets. That could mean revenues grow but profit margins shrink.

A UK growth share I’d consider

I’ll be keeping an eye on the JD Sports share price performance in the coming weeks and months.

One of the interesting things about growth shares is that often, they keep giving. Even though I didn’t buy in the early years, there’s still money to be made. JD has increased 275% in the past five years alone. A year ago, investors may have wondered whether future growth would be limited. If they decided then not to buy, they would have ended up missing out on the 33% growth over the past year.

Despite the risks, I would consider JD Sports as a UK growth share to buy and hold in my portfolio for years to come. 

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Christopher Ruane 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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