With UK stocks coming back into fashion at the moment, it’s tempting to think that the best opportunities have been missed. But city experts reckon there are two stocks that have huge growth potential over the next year or so.
Unlikely? Let’s try and find out.
A gift?
Card Factory (LSE:CARD) is a common sight on the UK high street. But in December 2025, the card and gift retailer issued a profit warning. Even with the group positioning itself at the value end of the market, it doesn’t seem to have escaped the impact of reduced disposable incomes. Higher employment costs, stubborn inflation and intense competition haven’t helped either.
But analysts reckon the group’s shares are currently (11 February) 57% undervalued. And with a forward price-to-earnings (P/E) ratio of just 5.7, I can see why they might hold this view. The stock also offers an attractive dividend. Based on amounts paid over the past 12 months, it’s yielding 6.7%. Of course, given the profit warning, there’s a possibility this might be cut. And the group has a relatively short history of paying dividends, so the past isn’t a good guide here.
To try and capture more profit, the group designs, manufactures, distributes, and sells its cards. It also claims this helps it react more quickly to changing tastes.
But the business feels a little old-fashioned to me. It recently bought Funky Pigeon to boost its online offering but sending cards does feel like a thing of the past.
The stock’s also one of the most volatile around. With a five-year beta of 3.1, it means if the stock market moves up (or down) by 10%, Card Factory’s share price will change, on average, by 31%.
Despite its attractive valuation and the impressive 12-month share price targets, I think there are better opportunities to consider elsewhere, in markets with healthier long-term growth prospects.
Such as?
One example is Gamma Communications (LSE:GAMA).
With the world moving away from copper phone lines to cloud-based communications, the telephone group’s likely to be one of the biggest beneficiaries. Its Unified Communications as a Service (UCaaS) offering is currently available in the UK, Netherlands, Spain, and Germany.
Analysts reckon its shares are 67% undervalued. With a P/E ratio of only 9.6, there’s strong evidence to support this view. And as an added bonus, the group also pays a modest dividend. The stock’s currently yielding 2.3%.
But the group’s profit has been impacted by a lack of economic growth and a loss of confidence among its target customer base of small and medium-sized businesses. Also, there’s plenty of competition out there.
And the UK’s plans to shut down its Public Switch Telephone Network (PSTN) in early 2027, is a double-edged sword. Some customers are moving to fibre solutions as a cheaper alternative to UCaaS. Although Gamma does provide this service, it earns a lower margin than on its cloud offering.
However, it operates in an industry where the direction of travel is clear. Of course, the PSTN switch-off might be delayed (it has been before) but, eventually, everything will be in the cloud.
I think the recent pullback in the group’s share price – it’s fallen 33% since February 2025 – could be an excellent buying opportunity. I reckon Gamma Communications is a stock to consider.
