2 British shares I’m buying this month!

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

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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.

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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. 

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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.

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 considered, so you should consider taking independent financial advice.

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