There’s no hiding the fact that many UK companies bring in the majority of their revenue from the US. Most however, aren’t those on the FTSE 250. It’s the more internationally-focused FTSE 100 companies that typically have headquarters around the world.
Still, there are a few outliers on the secondary index — and when it comes to growth, their smaller market-caps work in their favour. Of course, it’s too soon to assess where the US economy will go under Trump. But if it booms, I think investors should consider these two stocks for their growth potential.
4imprint Group
4imprint Group (LSE: FOUR) markets promotional merchandise like branded stationary, USB drives and apparel. Despite being based in London, the 40-year-old company derives 97% of its revenue from the US. Some of its stand-out featured brands include US giants Nike, Camelbak and Sharpie.
However, its drop ship distribution model faces risks from third-party service disruption. This can be costly and cause reputational damage. Still, the company has enjoyed spectacular success in the past 10 years, with the stock growing at an annualised rate of 21.4% a year.
In its latest trading update, it expects pre-tax profits of $153m for the 2024 full-year, exceeding expectations. Released earlier this week (21 January), the update also outlines revenue expectations up 3% and a 5% rise in existing customer orders. The shares jumped 12% on the news.
Despite the rapid growth, it’s still trading at 32% below fair value based on future cash flow estimates. Reinforcing that estimate, the average 12-month analyst forecast eyes a price 30% above current levels.
Hill & Smith
Highways construction firm Hill & Smith (LSE: HILS) provides engineering solutions and galvanising services in the US. Following the country’s introduction of a $1.8trn infrastructure bill in 2022, Hill and Smith’s products have enjoyed surging demand.
The stock price has shot up by over 100% since. Consequently, it has a slightly higher-than-average price-to-earnings (P/E) ratio of 20. Still, I think there’s more room for growth.
While the company suffered from surging debt before Covid, this has been decreasing although it still outweighs cash flow. That leaves a risk of defaulting if profits slip and it struggles to cover interest payments.
Recently-appointed CEO Rutger Helbing believes the company “has excellent prospects for further value creation” and there’s “strong demand for our products and services, particularly in the US.“
On 5 January, it paid a dividend of 16.5p per share to shareholders, up 15% from the previous period. This follows a 20% increase in revenue and a 39% rise in earnings. The yield now stands at 2.9%.
It could go either way!
While a booming US economy could help both these stocks, there’s a chance Trump’s tariffs send things the other way. That’s a key risk, besides the usual ones of foreign exchange fluctuations and regulatory changes.
Taking into account the current valuations, I think the rewards here could outweigh the risks. In the coming years, both these stocks could climb much higher than today so I think they’re both worth considering right now.
