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Best shares to buy: 2 UK growth stocks to snap up in December

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The UK stock market is home to plenty of top growth stocks. However, many are in the mid-cap and small-cap areas of the market, which means they’re a little more under the radar.

The good news, for long-term investors like myself, is that after a recent bout of stock market volatility, a lot of these growth shares are now cheaper to buy. With that in mind, here’s a look at two top growth stocks I’d buy in December.

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High growth, low valuation 

The first stock I want to highlight is Gamma Communications (LSE: GAMA). It’s a British technology company that specialises in unified communications solutions. Unified communications integrates multiple communication methods within a business, including phone calls, video conferencing, and instant messaging.

Gamma ticks a lot of boxes for me from an investment point of view. For starters, it operates in a high-growth industry. According to Grand View Research, the unified communications industry is set to grow by more than 20% per year between now and 2028. This market growth should provide tailwinds for the company going forward.

Secondly, it has a great growth track record and has historically been very profitable. Over the last five years, revenue has climbed from £192m to £394m. That represents growth of 105%. Meanwhile, over this period, return on capital employed (ROCE) has averaged 27%, which is excellent.

Third, the valuation is attractive. After a recent share price pullback, Gamma shares have a forward-looking price-to-earnings (P/E) ratio of about 25. For a tech company with a high level of recurring revenues (89% of total revenue in H1 FY22), I think that valuation is a steal.

There are risks to consider here, of course. One is that growth could slow after Covid-19 (when firms rushed to enhance their communications systems so employees could work remotely).

Overall, however, I think the risk/reward proposition here is very attractive right now.

A top UK growth stock

Another UK growth stock I’d buy today is Keywords Studios (LSE: KWS). It’s a leading provider of technical and creative services to the video gaming industry.

Keywords Studios also operates in a high-growth industry. According to Fortune Business Insights, the global video gaming industry is expected to grow by around 13% per year between now and 2028. Given that KWS serves nearly all the big players in gaming including Electronic Arts, Activision Blizzard, and Microsoft, I see it as a good ‘picks-and-shovels’ play on the industry.

Like Gamma, Keywords has a great growth track record. Over the last five years, revenue has jumped from €58m to €374m. That represents growth of 544%. Looking ahead, analysts expect revenue of €500m and €569m for 2021 and 2022 respectively which means they expect the company to keep growing at a healthy rate in the near term.

One risk to consider is that the company has just appointed a new CEO who doesn’t appear to have experience in the gaming industry. Another risk is the threat of companies like Roblox, which allow users to develop their own video games.

I’m comfortable with these risks, however. With the stock currently trading on a forward-looking P/E ratio of about 35 after a recent pullback, I see it as a buy.

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Edward Sheldon owns shares of Gamma Communications, Keywords Studios, and Microsoft. The Motley Fool UK has recommended Gamma Communications, Keywords Studios, and Microsoft. 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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