2 British shares I’m buying this month!

With improving results and solid foundations, could these two British shares be good purchases this month?

| More on:

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Key Points

  • For the three months to 31 December 2021, Sage Group's total organic revenue grew by 5%, year on year
  • Howden Joinery has a compound annual EPS growth rate of 12.2%
  • Both companies have solid historical results

Every so often, I search the stock market for the best British shares to add to my portfolio. By investing with a long-term mindset, I find I can largely ignore short-term market volatility.

Recent price movements in stocks have been erratic because of issues like the pandemic and the Russian invasion of Ukraine. However, I think I’ve found two strong firms to buy soon. Why am I attracted to these businesses? Let’s take a closer look.

Sage Group: starting to turn things around

The first company I’m considering buying this month is Sage Group (LSE:SGE). This firm specialises in software for accounting and business purposes. It currently trades at 715p, up 17% in the past year. 

For the years ended September, between 2017 and 2021, revenue increased from £1.7bn to £1.85bn. In addition, profit before tax rose to £347m from £342m.

Earnings per share (EPS) declined from 30.28p to 23.09p. As a potential shareholder, this is concerning because I like to see consistent earnings growth.

Furthermore, the 2021 annual results were inferior to results during 2020, when the pandemic was at its worst. 

During this time, revenue and profit was higher and EPS was 27.43p. It’s potentially a worry that this British share will struggle to continue meet high expectations in the post-pandemic era. 

In more recent results, however, things do seem to have been going in a better direction. For the three months to 31 December 2021, revenue was up 8% year on year to £429m. 

There was also a 13% uptick in the company’s software subscription service. In addition, total organic revenue rose by 5% to £458m. This gives me hope.  

Howden Joinery: one of the best British shares

The second business I’m considering buying is Howden Joinery (LSE:HWDN). This is a supplier of kitchens and joinery products for the building trade. 

Between 2017 and 2021, revenue rose by about 50% to £2.1bn. Profit before tax also grew from £232m to £390m and, unsurprisingly, EPS increased from 29.9p to 53.2p.

By my calculation, this means the company has a compound annual EPS growth rate of 12.2%. This is both strong and consistent.

In 2021, the firm paid a total dividend of 19.5p per share, a yield of 2.5%. It’s encouraging to know that I may also be able to derive passive income by holding this growth stock.  

Investment bank Credit Suisse placed an ‘outperform’ rating on the business in February. Its target price is 1,030p. It currently trades at 780p, up 6.5% in the past year. 

Credit Suisse believes that Howden is continuing to exceed earnings expectations, although it might suffer from a slowdown in the home improvements sector in the near future.

Overall, both of these British shares are mostly built on consistent results. While there are potential challenges ahead for both of these firms, I think they could continue to perform well if held for the long term. I will be buying shares in both this month. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has recommended Howden Joinery Group and Sage Group. 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.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »