These under-the-radar UK shares have been flying. Are they still worth buying?

Our writer picks out two lesser-known UK shares that have been vastly outperforming the market. Is there more to come?

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While it may seem like our stock market is struggling for direction, there are actually plenty of UK shares that have been piling on the profits for investors.

Today, I’m highlighting two examples of why it can be a good idea, not to mention highly profitable, to look beyond the ‘usual suspects’.

Big gains

At first glance, ME Group International (LSE: MEGP) is just about the most mundane business imaginable.

The company specialises in “instant-service equipment“. That’s vending machines in everyday language. ME has almost 44,000 of them across 19 countries, including laundry services, digital printing kiosks and photobooths.

By contrast, the share price performance in the last year has been nothing short of brilliant (+52%) thanks to trading hitting something of a purple patch.

The mid-cap recently announced close to 25% jumps in revenue (to £143.8m) and in post-tax profit (to £20.4m) for the six months to the end of April.

Clearly, its diverse growth strategy has struck a chord with both customers and investors.

More to come?

Have I missed the boat here? Possibly not.

Despite the positive momentum seen in the shares, I can still buy a slice of the company for 12 times earnings. On top of this, there’s a secure-looking 4.2% dividend yield.

As such, I certainly don’t think more share price gains are out of the question.

Then again, an improvement in overall market sentiment could see ME International stock spurned for racier alternatives. I also wonder about the long-term demand for things like photo booths.

Still, I’d at least consider an investment here if I didn’t already hold a sufficient number of cheap income stocks in my portfolio.

Index-beater

Another under-the-radar UK share that’s been going great guns has been promotions firm 4imprint Group (LSE: FOUR). Its value has climbed 47% in the last year as clients look to grow their brands post-pandemic and hit their marketing goals.

For perspective, the FTSE 250 index of which it is a member is down about 2% in the same time period.

Chalk up another victory for the nimble stock-picker!

All in the price?

One potential drawback to this share now, however, is the valuation.

In contrast to ME International, 4imprint shares now change hands on a price-to-earnings (P/E) ratio of 21.

Theoretically, this could mean that the market reaction to a slowdown in trading could be harsh. Rather ominously, it’s worth mentioning that management already warned in May of a potential slowdown in its primary US market. That sent the share price tumbling on the day (although it recovered).

Interim results on 9 August will certainly be worth paying attention to.

Quality UK share

Having said this, I do think this price tag can be justified based on how well the company scores on established ‘quality’ metrics.

Although operating margins are pretty average, the returns 4imprint makes on the money it puts to work in the business — otherwise known as return on capital employed — are usually far higher than most other companies

While we need to be careful not to oversimplify things, this can really help to turbocharge the rate at which investors’ wealth is compounded.

So, 4imprint really catches my eye.

I’d be willing to invest here, as and when cash becomes available.

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.

Paul Summers 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.

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