Fallen star

Let’s not beat about the bush — investors in fast fashion firm ASOS (LSE: ASC) have endured an appalling time of late. Partly due to the rotation away from growth-focused, lockdown winners into value stocks, the share price has tanked 25% in 2022 so far. In the last year, the former market darling’s value has dropped nearly 70%!

Personally, I see this as an opportunity. ASOS still has many attractive qualities, including a growing portfolio of brands and great international growth prospects.  

This is not to say that the share price capitulation isn’t completely unwarranted. ASOS has faced multiple headwinds in recent times, including higher costs and supply chain constraints. The former isn’t exactly great considering margins at this sort of business will never be sky-high. UK-based online clothing retailers have also seen increased competition from overseas rivals such as China-based Shein. Oh, and the big rise in the cost of living isn’t helping any retailer. 

Still, I think these concerns are now starting to be reflected in the valuation. At 21 times forecast earnings, ASOS still isn’t ‘cheap’ in the conventional sense but it’s far more attractively priced than it used to be. The move to the main market from the less-regulated AIM might also help to entice new investors.

Assuming inflation will eventually loosen its grip, I consider the £1.75bn cap a firm ‘buy’ for me at these levels. Half-year numbers are due not long after the ISA deadline passes.

Power up

A second growth stock I’ve got on my watchlist is XP Power (LSE: XPP). This is a company I’ve actually held within my Stocks and Shares ISA before (and made a very nice profit on). Since then, however, the shares have tumbled.

XPP’s valuation is now almost 30% below where it stood this time last year. Is the actual business really 30% less valuable though? I don’t think it is. XP is a leading developer of critical power control solutions for a number of sectors. Once on board, clients rarely leave. It therefore has a bit more earnings visibility than some in the market. 

Speaking of which, it’s worth mentioning this month’s full-year results. Despite multiple headwinds including pandemic lockdowns and component shortages, the company managed to grow revenue by 3% in 2021 (to £240.3m). I think that’s actually quite impressive considering that trade from healthcare customers has inevitably moderated following huge demand in 2020. XP Power also started 2022 with a record order book of £217m. 

Having been caught up in the general market sell-off, the shares now trade on 17 times forecast earnings. The 2.8% dividend, nicely covered by expected profit, is the cherry on top.

Like ASOS, I believe XP will recover in time. Of course, there’s no such thing as absolute certainty and the fact that Covid-19 infections in Asia are on the rise again is not great news for this Singapore-based business. Hence, I would never allow my Stocks and Shares ISA to be overly invested in a particular sector, including this one.

The post 2 growth stocks I’d buy before the Stocks and Shares ISA deadline appeared first on The Motley Fool UK.

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Paul Summers has now position in any of the shares mentioned. The Motley Fool UK has recommended ASOS and XP Power. 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.

The Boohoo (LSE: BOO) share price fell an astonishing 66% in 2021. Today, I’ll take a closer look at what happened and why the market has seemingly fallen out of love with the fast-fashion giant.

It all started so well

Holders of this stock must have been being optimistic as they entered 2021. At the beginning of last year, the Boohoo share price was riding high at 340p.

An encouraging trading statement in January went some way to justifying this momentum. Strong growth across all its brands and geographies in the last third of 2020 was reported. Accordingly, the company raised its guidance on full-year revenue. News later in the month that Boohoo had snapped up a number of brands, including Debenhams, was also positively received.

In March (and facing a potential US import ban), Boohoo was once again forced to defend its supplier practices. The AIM-listed firm published a list of 78 approved manufacturers as part of its ‘Agenda for Change’ programme. After a slight dip, the share price duly recovered, helped by news of a new warehouse that would boost sales capacity to above £4bn.

The Boohoo share price starts to tumble

It’s at this point that cracks began to appear. Helped by the rise in online shopping over the pandemic, full-year results in early May showed a 41% jump in revenue to £1.75bn. A 37% rise in core earnings to £173.6m was also reported.

Away from the headline numbers however, Boohoo said the the benefits of reduced returns seen over the pandemic would now lessen, but higher costs were here to stay. The company’s decision to maintain guidance in June’s trading update (despite sales rising 32% in Q1) also pointed to management becoming increasingly cautious on the firm’s near-term outlook. 

As the months passed, a significant minority of investors appeared to be growing frustrated with the company’s founders. No less than 12% of shareholders opposed the re-election of Carol Kane to the board. A statement that the online fashion retailer would be investing £500m in the UK over the next five years did little to appease owners.

The worst was yet to come. In September, the Boohoo share price fell sharply as it warned that previously-highlighted higher costs in its supply chain and higher wages for its workers would impact margins. This was followed by a lowering of full-year guidance in December’s (unexpected) trading statement. As expected, more clothes were being returned by customers. A serious slowdown in sales abroad, issues with deliveries, and ongoing cost inflation were also blamed. Omicron wasn’t helping matters.

Boohoo briefly became a penny stock when, in mid-December, the shares dipped to 97p. They had not been this low since September 2016. Perhaps the only crumb of comfort to holders was that industry peer ASOS was also ending the year firmly out of favour.

More news soon?

As things stand, analysts believe earnings per share will fall by 23% in the current financial year. This would leave Boohoo’s stock on a P/E of 20. Whether that proves to be a bargain for long-term investors remains to be seen. 

Based on past form, the £1.5bn-cap may provide the market with another update on trading later this month. Should this be the case, The Motley Fool UK team will be on hand to update readers.

The post Why the Boohoo share price fell 66% in 2021 appeared first on The Motley Fool UK.

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended ASOS and boohoo group. 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.

Despite a 13% rally on Friday, last week skimmed over 20% off the Boohoo (LSE: BOO) share price. The stock has struggled over the course of the year and investors have seen the share price of the online fashion retailer plummet 65%.

This raises the question: why have we seen such a downward trajectory in the Boohoo share price? And, more importantly, can it make a recovery from its poor form seen over the past year or so? Let’s take a look.

Boohoo earning report

The main reason for the latest fall was the release of the firm’s trading update. The central takeaway that hurt investor confidence was its guidance cut. The business blamed this on higher than expected returns rates, along with continuous delivery disruptions as Covid-19 continues to put a halt to normal proceedings. As such, management has adjusted full-year guidance. Safe to say, this did not sit well with shareholders.

What this translated to was a cut in total sales growth, with estimates now placed at 12%-14%. This was a large cut to the original 20%-25% guidance. Adjusted EBITDA margin guidance also saw a drop, of around 3%, to between 6% and 7%. For a potential investor like myself, this was not positive news.

However, and as my fellow Fool Zaven Boyrazian highlighted, there were some positive signs in the update. Most notably, the last nine months have seen double-digit sales growth, sitting at £1.48bn. That’s a 65% increase from the same period in 2019. The firm also said it continues to invest in its distribution network, with its first US distribution centre expected in 2023. That is important as fulfilling international orders from the UK dented global sales in the latest period. This investment demonstrates that, despite the short-term issues Boohoo may be facing, it certainly has long-term potential.

I’m still cautious

Yet I do have further concerns with Boohoo. One is competition, partly coming in the form of Chinese online fast-fashion retailer Shein. That business has experienced major growth recently, bringing in nearly $10bn of sales in 2020 – its eighth consecutive year of revenue growth above 100%. Forecast sales for the next year are just below the $15bn mark, showing the threat it poses to Boohoo. However, Boohoo is not alone in its struggles. And not all its competition is enjoying similar success to that of Shein. For example, ASOS has also suffered this year, with its share price down over 50% year to date.

Another concern for me is the reputational issues that continue to hang around. More specifically, accusations against suppliers paying workers below the minimum wage. This has massively dented Boohoo’s reputation — adversely impacting the share price.

My outlook

Boohoo’s return to its 410p high always looked to be an uphill battle, but it seems this latest update has rubbed salt in the wounds. While the update did offer glimmers of hope, the adjusted guidance reinforced the negative impacts Covid has had on businesses such as Boohoo. The 24% fall last week represents only a small part of what has been a poor year for the Boohoo share price. Although currently trading for 105p, I won’t be looking to buy Boohoo shares any time soon.

The post Why did the Boohoo share price fall over 20% last week? appeared first on The Motley Fool UK.

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Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended ASOS and boohoo group. 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.

Fast fashion multi-bagger

The penny stock in question is Sosander (LSE: SOS). Providing “a one-stop online shop for style-conscious women who have graduated from price-led alternatives”, the company also boasts brand partnerships with FTSE 100 firm Next, FTSE 250 member Marks & Spencer, and John Lewis. Just like the aforementioned Boohoo and ASOS, Sosander makes full use of data analysis to gauge which products it should prioritise and the best ways of reaching its target audience. 

Despite only being around since 2016, the company was listed on AIM only a year later. Performance since then has been somewhat erratic. For example, the share price went from 45p in September 2018 to just above 5p when the first UK lockdown was announced. However, anyone brave enough to buy this penny stock back when the chips were down will have done extremely well. Since March 2020, the valuation has climbed roughly 560%!

Based on today’s half-year numbers, I think there could be even more upside ahead.

Sales soar at this penny stock

At £12.2m, revenue rocketed no less than 184% in the six months to the end of September. To put this in perspective, that’s more than in the whole of the previous financial year. Gross profit came in at £6.9m — up more than 200% — and gross margin hit a superb 56.5%.

Other positives include the number of active customers over the six months soaring by 41% to over 191,000. This suggests that co-CEOs Ali Hall and Julie Lavington have got their marketing strategy spot on. 

Like many penny stocks, Sosander remains loss-making. However, an EBITDA (earnings before interest, tax, depreciation, and amortisation) loss of just under £1m is lower than the £1.02m seen last year. In other words, things are going in the right direction. In fact, the Wilmslow-based business revealed that it was EBITDA positive in both October and November as shoppers snapped up partywear, outerwear, and knitwear. 

No sure thing

Perhaps unsurprisingly, Sosander stated that it was trading ahead of current analyst expectations for the full year. Unfortunately, the share price is barely up as I type. I think this is most likely due to traders being caught off guard by suggestions that existing vaccines may not be all that effective against the new Covid-19 variant. On another day, the reaction might have been a lot different.

Even so, it’s worth bearing in mind that Sosander is hardly a risk-free proposition. Although the company had seen “no material impact” from supply chain disruption so far, things could easily get worse before they get better. I’m also minded to remember that, pandemic or not, the £75m cap operates in a highly competitive industry where, I imagine, brand loyalty is increasingly hard to secure.

My verdict

No one can say for sure what will happen next with Covid-19. As promising penny stocks go, however, this is definitely one I’ll be adding to my watchlist. If general market sentiment dips again over December, I may just need to make room for Sosander in my portfolio.

The post This penny stock is putting Boohoo and ASOS to shame! Time to buy? appeared first on The Motley Fool UK.

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended ASOS and boohoo group. 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.

Today, I’m taking a fresh look at the company and asking whether this weakness could represent an opportunity in advance of next week’s Q3 numbers (due 20 October).

Deliveroo share price: time to hop on board?

Based on its most recent set of numbers, Deliveroo certainly looks like a compelling growth play. 

Back in August, ROO revealed that the value of orders placed using its platform had more than doubled in the first six months of its financial year to £3.39bn. Importantly, the company also said that it had seen “no material impact” from the reopening of restaurants in Q2. This was always one of my biggest concerns with the stock and suggests that there has now been a permanent shift in consumer behaviour.

A spate of deal-making in recent months has also been very encouraging. Building on its existing partnership with German discounter Aldi, ROO has recently hooked up with another supermarket, Morrisons, to offer a rapid delivery service (Hop) in southwest London initially, 

Clearly, any signs of initial success with this initiative and news of more deal-making next week could reassure holders. It could also succeed in helping the Deliveroo share price recover its mojo after a wobbly September.

On the other hand…

As positive as recent developments have been, there are also a number of reasons to steer clear. Perhaps the most pressing of these is that investors are taking flight from previously-loved growth stocks such as ASOS, partly due to concerns over cost inflation and supply chain hold-ups.

One might rationally argue that Deliveroo is operating in a very different area. But it’s still part of the next-gen, tech-based business wave. What worries me is that ASOS is profitable. Deliveroo won’t be for some time. This makes it harder to accurately value its stock, and this ‘jam tomorrow’ strategy could really backfire if we see a rise in interest rates to quell inflation.

Competition is another concern. We’re not only talking Just Eat or Uber Eats here. Across the UK and Europe, new firms promising ultra-fast delivery have sprung up, attracting customers with big initial discounts. That means margins will likely be very small for everyone involved. It also makes ROO look unexceptional.

Interestingly, JP Morgan recently cut its target for the Deliveroo share price to 320p from 393p. That’s not encouraging in the run-up to next week’s update. However, it may be more realistic considering the challenges ahead. And to be fair, it would still give me a 15% gain from here.

My verdict

The Deliveroo share price still languishes far below its IPO value (390p). So long as the firm is able to continue winning market share and show progress towards making a profit, I think there’s a good chance of the company getting back to this level in time. The question, however, is just how long investors will be patient.

As things stand, I think we might see a brief rally on 20 October. That said, I’m still not tempted to buy today. To really get me interested, the Deliveroo share price needs to fall significantly.

I feel ROO definitely isn’t a bargain today.

The post Is the Deliveroo share price a bargain ahead of next week’s update? appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended ASOS, Deliveroo Holdings Plc, Morrisons, and Uber Technologies. 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.

Beighton has blamed this on supply chain issues caused by the Covid-19 pandemic. These, as we know, are a long way away from being solved. But when I zoom out and look at the ASOS share price history, as well as the fundamentals of the business, I think that this sudden dip represents an excellent buying opportunity for my portfolio.

ASOS fundamentals

ASOS is an online retailer that focuses on the sale and manufacturing of affordable clothing. This business model comes with some benefits but a lot of risks. As an online retailer, ASOS is able to cut costs on rent and staff, two of the major expenses to any business. But profit margins for affordable fast fashion can be small, and ASOS often operates with as little as 4% net profit. This contributes to the volatility in the ASOS share price.

Share price history

The first thing I see when I look at the history of the ASOS share price is extreme volatility.

Peaking first in February 2014 with a price of 6,960p, ASOS’ stock value then suddenly dropped by 40%. After a three-year recovery it was then able peak once again in early 2018 at 7,530p. But this was once again followed by a precipitous fall.

Here, I see a boom-bust cycle caused by investor over-confidence. ASOS had been doing consistently well in the years-long run-up to these periods, but was then hit by sudden drops in revenue that scared off shareholders. I believe that the same thing is happening now.

Why I’m buying 

The fashion industry is fickle. We all need to buy clothes but no one can hope to design the best look every year.

Given that, ASOS’ fundamentals remain strong. The company has brand recognition and low overheads. It was even able to halve its debt during the pandemic and continues to have a decent price-to-earnings ratio of 13:93. This is all great news for the ASOS share price.

Now, as winter draws near, people will want to spend less time shopping outside. They will want to buy more clothes both for themselves and as Christmas presents. Given what we know about the current price of gas, I’ve been looking at their line of jumpers myself.

Why I’m not buy…yet

I will not be buying ASOS just yet. I think that the share price still has some way to fall, but I will be keeping a close eye on it. These supply chain problems are external issues (like the HGV driver shortage), rather than problems with the business model or its management. I believe we will see the ASOS share price rise once again, once these are resolved.

The post The ASOS share price has crashed. Is now the time to buy? appeared first on The Motley Fool UK.

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James Reynolds has no position in any of the shares mentioned. The Motley Fool UK has recommended ASOS. 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.

Revenue and profit jump

Unfortunately for existing holders, here’s where the good news ends.

CEO departs

In a separate statement today, ASOS revealed that CEO Nick Beighton would be leaving the company with immediate effect. A search for his successor is now underway.

Clearly, all companies will periodically require new leaders/fresh blood. After 12 years at ASOS (and six leading it), Beighton’s departure isn’t entirely unexpected. For its part, the company reflected on wanting to have the best team in place to target annual revenues of £7bn within three to four years and become “one of the few truly global leaders in online fashion retail”.

If this were the case, however, you would think that a new CEO would already be waiting in the wings. The fact that no one has been lined up is disappointing, in my view.

ASOS share price: a warning?

Despite recovering slightly, the ASOS share price is down a bruising 10% as I type. This means the company’s value has nearly halved in 2021 so far. In the last 12 months, it’s down a staggering 53%.

Things could easily get worse in the months ahead. Supply chain pressures won’t go away quickly. In fact, the company believes that this issue will lead to “mid-single-digits” revenue growth in H1. 

When this headwind is combined with further investment and a return to normal returns rates, full-year pre-tax profit is now predicted to between £110m and £140m. Achieving the lower number would represent a near-40% decline. Seen from this perspective, I’m not surprised the ASOS share price has tumbled again.

My verdict

I’ll hold my hands up and say that I thought ASOS already presented as a potential bargain before today. Although no one can reliably predict where share prices will go in the near term (not to mention accurately call a management merry-go-round), my timing was clearly off.

Even so, I continue to believe that the fragility of the ASOS share price is ideal for patient growth investors who can march to their own beat. Despite the departure of its CEO, this remains a good business with £200m in net cash, a huge following and a sound strategy for growth (including the acquisition of Topshop and a partnership with Nordstrom). 

Were it not for the fact that I’m already heavily invested in rival Boohoo, ASOS would probably top my shopping list today. The sector sell-off looks overdone, in my opinion. As things stand, however, I’ll remain on the sidelines for now.

The post The ASOS share price crashes again. Here’s what I’m doing now appeared first on The Motley Fool UK.

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended ASOS and boohoo group. 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.

The Boohoo (LSE: BOO) share price crashed in early trading this morning. This is despite news the fast-fashion giant had achieved record sales over the six months to the end of August.

Let’s take a deep dive into today’s statement and extract the key points that current holders (like me) and prospective buyers need to know if we’re to decide whether this is fall’s justified.

Reasons to be cheerful

Why not start with the positive news? For me, there was actually a lot to like in today’s statement. 

Claiming to be “leading the fashion eCommerce market” is no small boast. With Boohoo, however, it’s starting to look increasingly justified. The business achieved £976m in sales over the period — a rise of 20% over that achieved in the same period in 2020.

More importantly, this was 73% up on the £565m logged two years ago. Considering the damage wreaked by Covid-19 last year (and despite Boohoo managing to do very well considering), I’m taking this latter percentage as better evidence of just how well the company’s expanding.

What’s more, this growth isn’t restricted to its home market. In addition to sales increasing by 81% in the UK over this two-year timeline, Boohoo’s international sales jumped 63%. A 126% rise in the US is further evidence of just how well the company’s travelling.

When you consider how much criticism it’s has faced over the last year, due to concerns over the quality of its suppliers and its potential to impact shoppers’ behaviour, this is pretty stellar stuff. 

Boohoo’s share price crash

So why the crash? There are a few reasons. Despite the huge sales figure, adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) fell 5% to £89.8m. As the company pointed out, this was 40% higher than that achieved in 2019.

However, it was lower than what the market was expecting, due in part to “£26m of freight and logistics costs inflation.” And the market can be brutal if it doesn’t get what it wants. Adjusted pre-tax profit fell 20% to £63.8m.

Although no great surprise, some investors may also be put off by the company’s intention to continue throwing cash at existing and new brands. Capital expenditure for the full year is now likely to be in the region of £275m — 10% higher than the maximum Boohoo previously predicted. Due to infrastructure and marketing spending to date, Boohoo’s war chest of cash is already much depleted to £98.4m. 

Other possible reasons for the Boohoo share price tumble include a reversion to pre-pandemic return rates and competition from physical stores. Neither of these should really come as a surprise, but investors are clearly in an unforgiving mood. 

And then there was the change in guidance…

Lower sales growth

Today, Boohoo said it expects full-year sales growth of between 20% and 25%. Previously, it had targeted 25% growth. For a company that’s consistently raised expectations over the years, that was always likely to sting. 

To achieve this, BOO will need to post growth of 20-30% in the second six-month period. On a positive note, the company made a point noting that demand for its fashion brands had improved last month, especially in the UK. This momentum has apparently continued into September with gross sales growth higher than that seen in Q2. 

Naturally, there’s no sure thing when it comes to business and, consequently, investing. As things stand, Boohoo is expecting the impact of Covid-19 factors to “normalise over the medium term” but there’s no guarantee this will happen. Moreover, the initial rush to purchase new clothes as the UK emerged from multiple lockdowns could/will moderate. Competition from online-only rivals such as ASOS will remain fierce too. 

Those rising freight, logistical and labour costs certainly won’t disappear overnight either. Again, Boohoo believes these headwinds will eventually reduce thanks, in part, to its recent investment in its infrastructure. But again, it has little control over this in reality. Indeed, Boohoo already thinks margins could fall to 9-9.5% from the previous estimate of 9.5-10%. This seems likely to be another reason for investors heading for the exits this morning. 

Operational progress

As a holder, I need to be comfortable with the above. And I am. Short-term headwinds aside, Boohoo’s a very different beast than it was even last year. Having snapped up brands when everyone else was losing their heads, the company now has an addressable (and dressable) market of 500 million potential customers.

How much of this it’s able to capture remains to be seen. Even so, significant progress has already been made on an operational level. Over the six month period to August, Boohoo has relaunched four new brands it bagged on the cheap.

Of these, Debenhams is by far the most interesting acquisition for me since it opens up a whole new set of markets, including homewares and beauty. If it can work its magic here, today’s fall in the Boohoo share price will be but a blip in time.

On top of this, there’s a commitment to opening a new distribution centre in the US. This should further boost Boohoo’s presence in what’s already proving to be a very lucrative market for the £3bn-cap.

Away from the headline numbers, there’s also clear evidence (in my opinion) that Boohoo is actively addressing those ESG concerns via its ‘Agenda for Change’ initiative. Lists of UK and international suppliers have now been published, providing visibility to concerned investors. The company is also beginning to stock more sustainable clothing and will launch a ‘resale platform’ next year.

Staying put

As a holder of the stock, I’m obviously gutted by the market’s reaction to today’s news. It is, however, not completely surprising, given the tendency of traders to sell first and evaluate later.

Share price shenanigans aside, the fact that Boohoo is experiencing similar problems to other listed companies, but still managing to grow strongly, gives me a lot of confidence. If anything, I believe today’s crash in the Boohoo share price is a golden opportunity for a long-term holder such as myself to continue increasing my stake in the company.

The investment case hasn’t changed, after all. If I’m truly the Foolish long-term investor I believe myself to be, I simply need to sit tight and ride out the storm.

The Boohoo share price is now 40% below where it stood this time last year. Anyone buying back then has my sympathies. Notwithstanding this, the margin of safety is surely now better than it’s been for a very long time.

Having made the mistake of snatching at profits with Boohoo in the past, I’m in for the long ride. 

The post The Boohoo share price has crashed! What’s going on? appeared first on The Motley Fool UK.

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Paul Summers owns shares in boohoo group. The Motley Fool UK has recommended ASOS and boohoo group. 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.

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.

The post 2 ‘unstoppable’ UK shares to buy now appeared first on The Motley Fool UK.

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• Marks and Spencer’s share price is down 16% to below £4! Is now the time for me to buy the dip with an eye to £8+?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended ASOS, Clipper Logistics, and Joules Group. 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.

None of this has stopped me from continuing to buy growth stocks for my own portfolio though.

Contrarian growth stock

After sitting on the sidelines for a while, I’ve finally grabbed the bull by the horns and snapped up shares of online holiday firm On the Beach (LSE: OTB).

Devoid of the high fixed costs endured by larger peers such as TUI, OTB’s flexible, online-only business model ensures it has minimal cash burn while travel restrictions remain in place. A recent £26m share placing also gives the company sufficient financial firepower for a big marketing push when rules are relaxed and demand for holidays explodes.

This isn’t to say that taking a position now is without risk. Those restrictions will likely be in place for a while yet. Moreover, the barriers to entry into this market aren’t particularly high.

Nevertheless, the progress of vaccination programmes leads me to think that the risk/reward trade-off is far better than it used to be. OTB’s share price is also down roughly 40% since March. This gives me what I feel to be a decent margin of safety. I’ll be continuing to drip-feed my money into this growth stock over the next few months. 

Buying the dip

I simply couldn’t finish July without adding to my stake in fast-fashion giant Boohoo (LSE: BOO). A bumpy ride over the last month, not helped by a poorly-received update from industry peer ASOS, looks to be another opportunity to acquire this growth stock at a great price.

The 20% fall in Boohoo’s value over the last six months leaves its shares changing hands for less than 26 times earnings. I think that could prove to be a steal once the company puts its ESG (Environmental, Social, Governance) concerns to bed. The negative publicity will hopefully lessen as BOO demonstrates what it’s done to put things right with its supply chain.

Sure, there are other potential headwinds. Confirmation of an online sales tax could send the shares lower, as might a simple lack of news over the next month. However, some knockout interim numbers in September may arrest this fall. Evidence that recent acquisitions are bearing fruit would provide another boost. 

Investing megatrend

My last buy this month has actually been an investment trust rather than a single company stock.

I began buying Biotech Growth Trust (LSE: BIOG) in April. Unfortunately, its shares have drifted lower since then. Reasons could include the ongoing rotation from growth stocks into those appearing to offer more value. There might also be a belief that healthcare-related funds have had their time in the sun.

Notwithstanding this, I’m confident BIOG’s managers — many of whom are medically trained — know what they’re doing. An annualised return of 17% over the last five years is far better than the trust’s benchmark. Then again, this has been at the expense of greater volatility, As such, those with weak stomachs need not apply.

Given the rate of technological progress, this area could be one of the investment themes for years. I think a diversified trust like BIOG is the best way to play it.

The post 3 UK growth stocks I’ve been buying in July appeared first on The Motley Fool UK.

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Paul Summers owns shares in On The Beach, boohoo group and Biotech Growth Trust. The Motley Fool UK has recommended ASOS, On The Beach, and boohoo group. 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.