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Warpaint London’s share price rockets 15%! Should I buy this UK share now?

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The Warpaint London (LSE: W7L) share price has been in rude health in recent times. The make-up manufacturer has risen 140% in value over 12 months and it’s risen by double-digit percentages in Friday business too following the release of fresh financials.

At 160.5p per share the Warpaint share price was up 15% on the day. It had reached record highs of 163p earlier in end-of-week trading before settling lower.

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Warpaint London enjoys sales surge

Ahead of its AGM today, Warpaint London described trading in the year to date as “encouraging.” It said that business was “particularly pleasing” in the UK during the first five months of 2021, with sales on these shores up 64% from the same 2020 period.

Turnover here was also up 18% from the corresponding period back in 2019.

Warpaint said that sales of its W7 brand had been boosted by its rollout in Tesco stores. It’s now stocked in more than 1,300 stores compared with just 56 last June. And the AIM company said that it plans further expansion of full W7 cosmetic displays later in 2021.

Foreign success

Warpaint has also enjoyed strong trading in its foreign marketplaces. In the US, sales have exceeded expectations following a trial launch of W7 products in Francesca’s stores. The cosmetics giant intends to be selling its goods out of a “significant proportion” of Francesca’s 444 stores by the end of the year.

Today’s release shows that Warpaint is also enjoying soaring online custom. Between January and May, sales of W7 products stood at almost three times the level it recorded during the corresponding 2020 period. The company said that it expects “further significant growth” too, “albeit from a modest base”.

Looking good!

Commenting on recent trading, Warpaint chair Clive Garston said: “I am optimistic that these positive trends will continue and with cash today of approximately £6.6 million and no debt, I believe we are well placed to deliver profitable future growth.”

City analysts think that the company can continue to deliver solid earnings growth too. They forecast bottom-line rises of 115% and 24% in 2021 and 2022 respectively. Accordingly, Warpaint trades on a forward price-to-earnings growth (PEG) ratio of 0.1. A reading below 1 means a UK share could be undervalued by the market.

There’s a lot that I like about Warpaint and its products. In an era of ‘ast fashion in which people look to build their wardrobes for less, it’s perhaps no surprise that the appeal of low-cost make-up like W7 is also soaring as people try to stretch their shopping budgets further.

I think that Warpaint’s impressive performance online also provides grounds for optimism, as do plans for additional product rollouts in physical retail stores. Okay, the cosmetics firm may not have everything its own way looking ahead. Competition in this market is intense and profits might also be squeezed by rising raw material costs. But at current prices, I’m seriously considering buying the UK share for my own investment portfolio.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco. 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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