Finding the best shares to buy is always challenging, even for professional investors. Fortunately, the 2022 stock market correction has made the process a little easier, with valuations dropping steeply, creating buying opportunities all around.
That doesn’t mean to go forth and start buying every beaten-down enterprise on the London Stock Exchange. After all, some companies have been sold off for a good reason. But in many cases, share prices of terrific businesses have been slammed on fears of ultimately short-term problems despite the long-term picture remaining intact.
With that in mind, I’ve spotted one promising firm that falls into this category. And investors with £1,000 may want to snatch up some shares while they’re still cheap.
Trouble in the courts
XP Power (LSE:XPP) is a leading designer and manufacturer of electronic components used throughout machines in the medical, industrial, and semiconductor manufacturing industries.
For years the group traded at a significant premium, matching its impressive growth and shareholder value creation. Yet XP Power quickly started losing favour as supply chain disruptions caused its production lead times to extend.
To make matters worse, in March, a jury found the company guilty of stealing trade secrets from its competitor Comet after hiring some of its employees in 2017. It remains unclear whether the firm intends to appeal the decision. But what is clear is it now has to pay the $40m fine.
Needless to say, this isn’t good news. And it certainly doesn’t make XP Power sound like “best shares to buy now” material.
Taking a step back
With the damage of the lawsuit and supply chain disruptions being baked into the valuation, the share price has plummeted by 60% in the last 12 months. However, it’s worth remembering the legal bill is only a one-time expense. As for the supply chain disruptions, these will naturally start to alleviate themselves. There’s even evidence this is already happening.
The book-to-bill ratio tracks the proportion of orders received versus orders shipped. And looking at XP Power’s latest third-quarter results, this metric has dropped from 1.58 in September 2021 to 1.27 today. In other words, order fulfilment is accelerating. And with more products being delivered, revenue has followed suit, growing by 29% over the same period.
What about reputational damage? Being sued for stealing trade secrets doesn’t exactly look good. And while the firm has undeniably tarnished its image, this doesn’t appear to have deterred customers. In fact, since the start of 2022, the group has received £294.2m in orders. That’s 15% higher than a year ago.
All things considered, XP Power seems to be back on track. And while mistakes have definitely been made, they haven’t compromised the long-term strategy. That’s why I believe these could be some of the best shares to buy now. So much so, I’ve even added them to my personal portfolio as well.
