The Motley Fool

Is this exciting UK stock a buy after its IPO?

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.

A graph made of neon tubes in a room
Image source: Getty Images

I’ve been looking at recent IPOs (initial public offerings) to see if any of them are buys for my portfolio. I think this UK stock is an exciting prospect after it listed on the Alternative Investment Market (AIM) this month.

Sometimes after listing, shares can run up in price too quickly as investors that missed the IPO buy the stock. I wrote about Darktrace recently and how I thought its share price did exactly this. Then there are times when early-stage and pre-profit companies list to raise equity capital, but unfortunately aren’t successful.

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!

I don’t think this IPO fits either of these situations. So, let’s see if this UK stock is a buy for my portfolio.

An exciting UK IPO

The company I’ve been looking at is Marks Electrical (LSE: MRK). Its shares listed on AIM in November at a price of 110p. As I write today, the current share price is 118p. This hasn’t had the euphoric rise like Darktrace did, so the shares might still be good value.

Marks Electrical was founded in 1987 by the current CEO. The company has also been profitable for at least the last three years. I think this means there’s little risk in Marks Electrical completely failing after its IPO.

So, what does the company do? Marks Electrical sells, delivers, installs and recycles large electrical items in the home.

Its vertically integrated and customer-focused strategy I think differentiates the business. This is because Marks Electrical owns its own distribution network, operating out of its Leicester headquarters. This central location, and owning its delivery vans and employing specialist drivers, means it can offer customers free next-day delivery and installation services.

Its high customer reviews I think signals that its business model is working as intended, and its distribution network is key here.

Recent results

Because Marks Electrical has only just listed, the amount of financial data I can see only goes back three years. Over this period, revenue has grown from £31m in 2019 to £56m for the full year to 31 March 2021. This is exciting growth.

The company has benefitted greatly over the pandemic as customers chose to spend more on big household items. Indeed, in the six months to 30 September 2021, revenue grew again by an impressive 78%. As the business is a pure-play online offering and physical stores have been disrupted due to the pandemic, I don’t expect this stellar growth rate to be maintained. There’s also the risk of supply chain disruption right now, though management have been able to navigate this well with its suppliers.

Is it a buy?

I do like the look of this IPO. It doesn’t have the risks of some new listings, and the founder-CEO still owns a significant stake in the business. The company has taken market share over the pandemic of the over £5bn domestic appliance market (this increased again in the recent half year results to 1.5%, up from 1.2% in March). I expect this can increase further as shopping habits permanently shift online.

For now, I’m going to place this UK stock high on my watchlist to see how the growth rate stabilises. There are other growth stocks to consider right now.

Like this one...

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Dan Appleby 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.