When it comes to searching for the best UK shares to buy now, I’m keen on photonic technology company Gooch & Housego (LSE: GHH).
Why I think it’s one of the best UK shares to buy now
The firm has generally grown its revenues, earnings and cash flow over several years. And that progress has reflected in a rising shareholder dividend.
Indeed, it took the recent coronavirus crisis to stall the dividend’s progress. Nevertheless, City analysts expect a strong bounce-back in the current trading year to September 2021 with the dividend hitting new highs.
Meanwhile, comparing the enterprise value (EV) close to £312m with the market capitalisation of around £284m suggests the company is conservatively financed. So, overall, I see Gooch & Housego as a long-term growth proposition operating in an attractive niche of the market.
Indeed, 10 years ago, the shares were changing hands near 467p. Today, the share price is about 1,220p. But it went just above 1760p in October 2018, so we could be seeing a pullback offering a better-value entry point right now.
Today’s full-year results report covers the period to 30 September, including trading outcomes affected by the lockdowns in the spring. And it also accounts for extra costs incurred because of mitigation methods within the business aimed at controlling the spread of the virus. Compared to the prior year, revenue slipped by 5.5% and adjusted earnings per share fell by almost 35%.
Looking ahead, chief executive Mark Webster admits that, in the short term, there’s “significant” global economic uncertainty because of Covid-19. But he reckons the company’s order book is “robust”. Meanwhile, all the firm’s manufacturing sites in the US, UK and China are open and operating at full capacity.
Webster reckons the company’s plan to streamline its manufacturing is on track and will deliver improvements in profitability. The directors have reduced the cost base and employee headcount to put the business “in line with the demands of the current working environment.” So it looks like the firm is adapting well for trading in a world featuring the Covid-19 virus.
Meanwhile, the directors think Gooch & Housego will deliver “material progress” in the current trading year to September 2021 and “substantial long-term growth.” Meanwhile, City analysts have pencilled in a robust earning recovery of around 27% for the current year. And with the share price near 1,220p, the forward-looking earnings multiple is around 31. I’d buy some of the shares now with a holding period of at least five years in mind and probably a lot longer.
But Gooch & Housego isn’t the only UK share I’m interested in right now. I also like the look of software company Oxford Metrics. And I’m keen on technology tools and systems provider Oxford Instruments. I’d also run the calculator over motor industry testing systems specialist AB Dynamics. All these companies strike me as decent long-term growth stories.
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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has recommended AB Dynamics and Gooch & Housego. 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.