The last year or so has been decent for many London-listed companies. However, some lower down the market spectrum have absolutely shot the lights out. Here are two examples, both of which still look like great UK shares to buy now.
Growing at a fast clip
One business that’s been going great guns recently is Clipper Logistics (LSE: CLG). The self-styled ‘retail logistics expert’ and returns manager has benefitted from the explosion in e-commerce in recent years. Multiple UK lockdowns have further boosted trading (and the share price).
June’s update provided a snapshot of just how well things have been going. Revenue for the full year to the end of April is now expected to come in at £698m. That’s a 39% jump on the previous year, partly due to the company winning new contracts with Joules and JD Sports, among others.
In addition to this, CLG recently signed a three-year extension to its contract with ASOS to handle the latter’s returns on the continent.
Taking all this into account, it’s perhaps no surprise Clipper believes EBIT (earnings before tax and interest) for FY22 and FY23 will now be ahead of consensus estimates “by mid-single-digit percentages in both years.“
Right now, the stock trades on 29 times forecast earnings. That’s pretty high, especially as a rise in unemployment post-furlough could prove a setback for retailers and possibly Clipper. Margins, while improving, are also fairly low in this kind of work.
However, this valuation seems more reasonable when looking at the company’s growth strategy. In addition to building its presence in Europe, the £800m-cap plans to launch a B2B online marketplace in September. This will target buyers from the “highly fragmented” elderly care market. Should it prove successful, Clipper may consider expanding the platform into other sectors.
A rapidly reducing debt pile is another positive.
Lighting up the market
A second company whose share price has been soaring has been Luceco (LSE: LUCE). The company is a market leader in LED lighting, portable power products and wiring accessories. Brands include Luceco LED, BG Electrical and Masterplug.
Half-year results are due early next month. However, we already know from July’s update they’ll be decent. Back then, LUCE announced that demand for its products had been “stronger and broader than expected.“
As a result, it now expects to hit revenue of £108m for the first six months of 2021. Adjusted operating profit is likely to come in at £19m. Both numbers are slight improvements on previous guidance.
To round things off, Luceco said figures for the whole of 2021 would now be ahead of what analysts had been predicting. Indeed, CEO John Hornby expects “another year of record results.” No wonder the shares have been in such great form.
But how much is this in the price? Personally, I don’t think the valuation of 20 times earnings is excessive. As such, I’d feel comfortable adding Luceco to my list of UK shares to buy.
This isn’t to say it’ll be plain-sailing. Despite managing to protect margins so far, “industry-wide” cost inflation looks like being a headwind for a while. The home improvement boom will surely moderate at some point too.
Still, there’s a very secure dividend to compensate for any turbulence.
