Here, I’m going to highlight three UK small-caps that I reckon are in bargain basement territory at present. I think these shares are worth considering today as the value on offer could quickly disappear if investor sentiment picks up.

A P/E ratio of 7.4

First up we have Renold (LSE: RNO). It’s an international supplier of industrial chains and related power transmission products.

This stock looks very undervalued to me. Currently, it trades on a forward-looking price-to-earnings (P/E) ratio of just 7.4.

Given that this company generates a large chunk of its revenues from the US (where construction activity is likely to be buoyant in the years ahead due to government spending on infrastructure) and that it has a strong order book, I reckon that earnings multiple is too low.

Now, it’s worth pointing out that Renold has a bit of debt on its balance sheet. This is a risk.

At the current valuation, however, I like risk/reward skew. It’s worth noting that the company just resumed paying dividends, which suggests that management is confident about the future and not so worried about the debt.

Growth at an attractive price

Next we have Team17 (LSE: TM17). It’s a British video game and educational app developer.

Currently, the P/E ratio here is about 12. I think that’s great value.

This is a company with an excellent growth track record. Over the last five years, its revenues have climbed by a whopping 270% to £159m.

Meanwhile, management is optimistic about the future. “Looking ahead, there is significant growth potential in our core markets,” said CEO Steve Bell in the company’s recent H1 results.

Of course, video gaming is a dynamic market and there’s no guarantee that Team17 will continue to have success with its games (which include Monster Sanctuary, Worms, and Overcooked: All You Can Eat).

Again though, at the current valuation, I think the risk/reward proposition here is attractive.

Significant long-term potential

Finally, check out Volex (LSE: VLX). It’s a manufacturer of critical power and data transmission products.

I hold this stock myself and one reason for this is that I reckon it’s undervalued. Currently, the P/E ratio here is just 12.9.

Given that Volex makes products for the fast-growing electric vehicle (EV) and data centre markets, and is enjoying strong growth itself (helped by key acquisitions), I reckon that multiple is on the low side.

It’s worth noting that the company recently advised that it’s performing well. In the first quarter of its financial year that ends on 31 March 2025, it registered year-on-year constant currency organic revenue growth of 9%, driven by “particularly strong performances” in the EV and data centre sectors.

Now, one issue with this company is that some of its markets can be a little cyclical at times. For example, last year, the EV market was quite weak.

Given this cyclicality, I think the key here is to take a long term view. Over the next decade, the EV and data centre markets are poised for significant growth, so Volex is well placed to do well.

The post 3 dirt cheap small-cap UK shares to consider buying this month appeared first on The Motley Fool UK.

Spire Healthcare

I’m considering adding more Spire Healthcare (LSE:SPI) shares to my portfolio as impatience with NHS waiting lists grows.

According to a YouGov survery, a whopping one in eight Britons have used private healthcare in the past 12 months. This has been driven overwhelmingly by a desire to be seen more quickly, as the chart below shows.

Data last week showed NHS waiting times have hit a new record high of 7.22m. And the number is tipped by some to keep soaring as people seek delayed medical treatment following the end of the coronavirus crisis.

So providers like Spire Healthcare can expect to remain extremely busy in the months and years ahead. In 2022 the business provided services for some 926,500 patients in total. This pushed revenues 8.3% higher year on year to a shade under £2bn.

The company faces pressures in the form of significant staff shortages. But despite this threat, City analysts are still expecting it to enjoy spectacular earnings growth over the next few years.

A 48% bottom-line improvement is predicted for 2023 alone. This leaves the business trading on a price-to-earnings growth (PEG) ratio of 0.7.

Any reading below 1 indicates that a stock is undervalued by the market. And it makes Spire one of the hottest value shares to buy right now, in my opinion.

Team17 Group

Consolidation in the video games industry continues to heat up. So now could be a good time to buy shares in a winning software developer such as Team17 Group (LSE:TM17).

Today was the turn of Angry Birds producer Rovio Entertainment to be snapped up by a bigger rival. Japanese industry titan Sega will acquire the business for a cool £625m.

Of course there’s no guarantee that Team17 will become a takeover target. But there’s an intriguing similarity between the UK company and Rovio: their expertise in mobile gaming.

This segment continues to outperform the broader video games market. And it’s tipped to continue doing so. Analysts at Statista expect mobile games revenues to rise at an annualised rate of 7.08% between 2023 and 2027.

Encouragingly, Team17 is increasing spending to boost its position here. In 2021 it acquired StoryToys, which makes education and entertainment apps for children. It followed this last year with the purchase of dedicated mobile game developer The Label.

Competition in the video games market is intense. But thanks to titles like Worms, Overcooked! and The Escapists, Team17 has a good record of succeeding in the face of this threat. In fact it has grown profits for seven years on the trot.

Today, the AIM-listed business trades on a forward price-to-earnings (P/E) ratio of 14.8 times. Given its scope for strong long-term profits growth — and the sky-high valuations of many other tech shares — I think Team17 shares look ultra cheap.

The post 2 cheap UK shares I’d buy for my Stocks & Shares ISA! appeared first on The Motley Fool UK.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Ashtead Group

What it does: Ashtead is a construction equipment rental company that operates in the UK and North America.  

By Ben McPoland. Ashtead (LSE: AHT) rents out diggers, power generators, traffic cones, and everything in between. It has an industry-leading position in the UK, and is second in the colossal North American construction tool-rental market.

The bulk of the firm’s profits is derived from the US. So there’s a risk that earnings could take a hit were the US economy — and consequently the construction industry — to slump this year. But in the long term, I see a couple of big growth drivers.

Firstly, the US tool-rental industry is extremely fragmented, with Ashtead and its nearest competitor commanding less than a third of the overall market. That leaves a long runway of consolidation left as smaller competition is mopped up.

Secondly, the US government has signed a $1trn infrastructure bill to upgrade its own domestic supply chains. Demand for construction equipment should soar.

The stock has a reasonable price-to-earnings (P/E) ratio of 19. Plus, the company pays a small but rapidly growing dividend.

Ben McPoland owns shares in Ashtead Group.

AstraZeneca

What it does: AstraZeneca is a global, science-focused pharmaceutical company that develops medicines across oncology, biopharmaceuticals and rare diseases.

By Harshil Patel. With a market capitalisation of £178bn, AstraZeneca (LSE:AZN) is currently the largest company in the FTSE 100. But even a stock of this size has room to grow further — particularly as it demonstrates a clear strategy, dominant market position and a solid track record.

This pharmaceutical giant has been putting great focus on its oncology portfolio in recent years. And it has led to several billion-dollar blockbuster drugs. But with over 25% of its sales going towards research and development, it’s only a matter of time before we see further progress in its pipeline.

Bear in mind there are risks with drugs trials, of course, and patents can expire.

That said, AstraZeneca has been one of the FTSE 100’s top-performing stocks over the past decade. And with a P/E ratio of 18, it still looks reasonable to me.

Overall it’s a resilient, and well-run business whose shares I’d buy for my ISA in March.  

Harshil Patel does not own shares in AstraZeneca.

Burberry

What it does: Burberry is a British luxury fashion brand with over 200 stores in 30 countries.  

By Charlie Keough. I think Burberry (LSE: BRBY) shares could be a top buy in March. What I like most about the stock is its relative resilience to inflation, with luxury goods retailers usually offering a greater hedge than less expensive brands. This is due to their customers tending to be less squeezed by the rising cost of living. 

This was seen in Q3, where store sales grew 11% (excluding Mainland China), including a strong performance in accessories.  

The business’ CEO Jonathan Akeroyd has also set ambitious growth goals, including an annual revenue target of £5bn over the long term. And what I further like about Burberry is the emphasis it’s placing on returning value to shareholders. Q3 saw the firm continue with its share buyback scheme, with the majority of the £400m buyback now completed.  

Sales in China have lagged behind other regions in recent times and Covid-19 always remains a lingering threat. However, with the Chinese economy beginning to re-open in 2023, I like the look of Burberry shares.  

Charlie Keough does not own shares in Burberry. 

GSK

What it does: GSK makes vaccines and specialty medicines for infectious diseases, HIV, oncology, and immunology.

By Charlie Carman. GSK (LSE:GSK) is a pharmaceutical stock on the rise. Following a demerger from its consumer healthcare arm Haleon last year, the company now focuses on vaccine and biotech products. A 27% rise in earnings per share for 2022 has vindicated this strategy.

Looking ahead, the firm continues to innovate. GSK has 69 vaccines and specialty medicines in its pipeline, including 18 undergoing phase III trials. Its candidate RSV vaccine for older adults shows particular promise. The respiratory virus has evaded scientists for over 60 years.

Admittedly, the outlook for GSK shares is clouded by legal battles regarding its discontinued heartburn drug Zantac. A Californian judge will determine whether the medication causes cancer when an ongoing class action concludes.

Nonetheless, I believe the product liability risks have been largely priced in. The company expects adjusted operating profit will increase by 10-12% in 2023, suggesting there’s significant growth potential in this stock.

Charlie Carman has positions in GSK.

Hargreaves Lansdown

What it does: The Bristol-based firm provides asset management services and is the UK’s most popular investment platform.

By Dr James Fox. Hargreaves Lansdown (LSE:HL.) disappointed investors in February when it published its results for the six months to December 31. The stock dropped over 10% from its peak.

However, I see this as something of an overreaction from the market. Revenue grew 20%, partially as a result of higher interest rates, and the business registered growth in terms of net new business and active clients.

This all took place during a period of economic turmoil, during which real wages and disposal income fell.

And with a forward P/E ratio of 13.5, I find the valuation is very attractive. After all, growth stocks tend to trade at a premium. The dividend yield now sits around 4.6% — above the index average.

I do worry about fresh competition in the sector, but for serious investors, I believe Hargreaves has the best platform.

Dr James Fox owns shares in Hargreaves Lansdown.

Howden Joinery

What it does: Howden Joinery Group sells kitchens and joinery products, along with the associated manufacture, sourcing and distribution of these products.

By Paul Summers: The Bank of England’s belief that the UK will enter a recession in 2023 — but that it will be shorter and less severe than previously thought — has given the share price of Howden Joinery (LSE: HWDN) a much-needed boost. 

Assuming this prediction doesn’t change, I can see demand for its products recovering in advance. This could make the current P/E of 15 good value in time. Howden is also forecast to safely yield 2.6% in dividends this year.

Of course, forecasting is more art than science. There are plenty of things that could shake markets lower this year. I’m also a bit wary of the company’s rising debt levels. 

But focusing on the short term is just not the Foolish way. Moreover, Howden still possesses many of the quality hallmarks I like such as high margins and returns on capital. 

It’s one I’d want to own for years rather than months.

Paul Summers has no position in Howden Joinery.

J D Wetherspoon

What it does: Wetherspoon operates an estate of nearly 850 pubs and a hotel portfolio, mostly concentrated in the UK market.

By Christopher Ruane. I have held my faith in J D Wetherspoon (LSE: JDW) even as the stock lost a lot of value over the past year. Lately it has been moving up again, though. I have been buying the shares, and so too has the company’s founder and chairman, Tim Martin.

Times remain tough for Spoons, which has been trying to offload dozens of its pubs but not found buyers for all of them. The pub market continues to contract.

But I think demand will remain albeit at a reduced level – and Wetherspoon is the large-scale operator I see as best placed to meet it.

The firm has a proven business formula, an attractive customer proposition and a well-chosen selection of pubs in central locations. It has returned to profit at the operating level. With interim results due on 24 March, I think investors will focus on whether Spoons has turned from being a recovery story into a growth one again.

Christopher Ruane owns shares in J D Wetherspoon.

Johnson Matthey

What it does: Johnson Matthey is one of the world’s largest platinum refiners and catalytic converter manufacturers.

By Roland Head. I think this could be a good time to consider buying shares in FTSE 250 firm Johnson Matthey (LSE: JMAT). After a difficult period, I reckon this business is poised for a return to growth.

November’s half-year results confirmed my view that this year should be the low point for profits. The company’s guidance was for a stronger second half, as price rises helped claw back lost profits.

Admittedly, growth in electric vehicles means that the company’s automotive catalytic converters could eventually become unnecessary. However, I think they’ll remain essential for many years yet, especially for heavier vehicles like lorries.

Looking ahead, chief executive Liam Condon is focusing on hydrogen. This is widely expected to be a suitable fuel for situations where electric power isn’t practical.

Johnson Matthey has been in business for more than 200 years. I think it will remain successful. The shares look good value to me, as a long-term buy.

Roland Head does not own shares in Johnson Matthey.

London Stock Exchange Group

What it does: London Stock Exchange Group is a financial markets infrastructure and data business.

By Edward Sheldon, CFA. I’m bullish on London Stock Exchange Group (LSE: LSEG) for several reasons.

One is that the company recently announced a partnership with tech giant Microsoft. This partnership will see the two companies work together to develop next-generation artificial intelligence (AI) and cloud-based data and analytics services. London Stock Exchange believes the deal will increase its revenue growth “meaningfully” over time as new products come on-stream. UK fund manager Nick Train – who owns the stock in several of his portfolios – has described the deal as “massive”.

Another reason I’m bullish is that the shares sport an attractive valuation. As I write this, the forward-looking P/E ratio is in the low 20s. I think that’s very reasonable given the company’s competitive advantages.

One risk to consider here is net debt, which stood at £7.2bn at 30 June. This is something to keep an eye on.

Overall, however, I see a lot of appeal in this stock.

Edward Sheldon owns shares in Microsoft.

Scottish Mortgage Investment Trust 

What it does: Scottish Mortgage is an investment trust with a portfolio based around the themes of healthcare technology, decarbonisation, and digitalisation. 

By James J. McCombie: The Scottish Mortgage Investment Trust (LSE:SMT) share price was hit hard when markets turned on growth and tech stocks. It is down almost 51% from November 2021’s all-time high, but the slide appears to have stabilised. Right now, I can buy a slice of Scottish Mortgage’s portfolio of high-growth companies for around 16% less than it is estimated to be worth on a per-share basis. 

Scottish Mortgage’s portfolio includes foreign listed stocks (mainly US) and unlisted companies, like Space X. Getting exposure to these would be problematic to impossible for me to do directly. And they all operate in industries and sectors that I agree are ripe areas of growth.

There is, of course, a possibility that the rout on growth and tech stocks could continue or individual portfolio company failures could occur. But at this price I think the risk is well worth me bearing for the potential rewards on offer. 

James J. McCombie does own shares in Scottish Mortgage Investment Trust 

Team17 Group 

What it does: Team17 Group is a video games developer whose products can be played across PC, console and mobile.

By Royston Wild. 2022 was a tough time for tech stocks. And while share prices have recovered ground in recent weeks, a fresh dip in investor confidence could send the sector plummeting again. 

Having said that, I believe that shares in Team17 Group (LSE:TM17) could be a top buy for UK investors. The video games industry is expanding rapidly, and software developers like this might enjoy strong and sustained profits growth over the long term. 

Reports of a monster £500m commercial deal between Electronic Arts and the Premier League illustrates the huge potential of this sector. Sky News reports that the deal could be worth double its existing arrangement. 

I’m encouraged to buy shares in Team17 specifically following its robust trading update in January. Back then it reported “strong growth” during 2022, and advised that revenues and earnings would be “significantly ahead of market expectations.” 

The developer of popular franchises including Worms and Overcooked! clearly has the wind in its sails right now. 

Royston Wild does not own shares in Team17 Group.

The post Best British shares to buy in March appeared first on The Motley Fool UK.

Agronomics

Companies that remove animals from the food chain could thrive over the next decade. Rising consumer concerns over livestock welfare, allied with a growing desire among lawmakers to reduce farming’s environmental impact, could see a radical change in our diets.

This is where Agronomics (LSE:ANIC) comes in. The venture capital business is invested in more than 20 early-stage companies that are creating products from animal and plant cells. We’re talking beef, chicken, seafood here and even cotton, leather and palm oil.

Investing in early-stage companies like these can be highly risky. For one, it can be hard to slap an accurate valuation on them and investors can easily pay over the odds.

But I believe the rate at which lab-grown meat demand is projected to grow still makes this AIM share an attractive stock to buy. Research suggests the global cultivated meat market will record a heady compound annual growth rate (CAGR) of 11.4% between 2022 and 2028.

What’s more, Agronomics shares look especially cheap based on current broker forecasts. Today the company trades on a forward price-to-earnings growth (PEG) ratio of 0.1.

A reading below 1 indicates that a share is undervalued.

Team17 Group

Investing in games studios like Team17 Group (LSE:TM17) isn’t danger free either. The industry is highly competitive and disappointing sales can smack profits hard.

The threat is particularly high for smaller operators like this too. They don’t have the colossal R&D and marketing budgets of big beasts like Take-Two Interactive, Activision Blizzard and Supercell.

However, Team17 is embarking on rapid expansion to take the fight to its rivals. The acquisitions of StoryToys and astragon in the past two years has significantly grown group sales. Revenues jumped 33% in the first half of its fiscal year to a record £53.2m.

Its successful expansion drive makes the AIM highly appealing, in my view. So does the pace at which the games industry is tipped to grow. New console launches and an improving regulatory environment in China entertainment mean entertainment software sales are tipped to soar over the next 10 years.

Buying games developer shares could be a good way for me to protect myself during this economic downturn too. As analysts at Morgan Stanley comment: “Staying at home fighting zombies is generally cheaper than a night out with friends, even with the initial investment in games and consoles”.

Finally, I like Team17 shares because of the company’s vast exposure to the mobile games market. This segment is growing particularly rapidly, driven by the rollout of 5G technology

At current prices, the tech share trades on an historically-low price-to-earnings (P/E) ratio of just 18.3 times. Like Agronomics, I think Team17 is a top value stock to buy right now.

The post 2 AIM shares I’d buy to hold for 10 years! appeared first on The Motley Fool UK.

Here are three I believe are worthy of investment this month.

Team 17

A market darling during the pandemic, indie video game developer Team 17 (LSE: TM17) is now very much unloved. The AIM stock’s share price has halved in 2022 to date. Personally, I see this as an opportunity.

Back in March, the company announced record results. Following the release of 12 new games in 2021, revenue rose 9% to £90.5m. Pre-tax profit was up 11% to £29.1m.

A risk with any developer is that what they produce has no guarantee of proving popular. Moreover, the rise in the cost-of-living combined with wage inflation is expected to increase costs this year by roughly £1.7m. Revenues are also expected to be hit by around £4m due to the Ukraine/Russia war.

However, the balance sheet looks strong and a number of recent acquisitions are expected to be “immediately earnings accretive” in 2022.

At 17 times forecast earnings, I think Team17 looks a great buy.

SDI

Scientific and tech product producer SDI (LSE: SDI) is an AIM stock I’ve had on my watchlist for some time now. The reason I haven’t been buying is that the valuation has always looked full. However, the company is now getting much closer to entering my ‘buy zone’.

Sure, it’s still not cheap. The shares currently change hands for 19 times earnings. So there’s a chance we might not have seen the bottom yet if economic fears worsen. There’s also no dividend stream to compensate me while I await a recovery.

Full-year numbers are due on 18 July. Based on its most recent trading update, I think these should be pretty stellar. A couple of months ago, SDI said revenues and profits were expected to “materially exceed current market expectations“. Not many businesses are saying that right now!

Consequently, I’d be comfortable buying now.

Strix

A final AIM stock I think is worthy of investment in Juy is one I already own: kettle safety control supplier Strix (LSE: KETL). This is despite seeing all my paper profits evaporate in 2022. The shares are down almost 45% this year.

Still, the fact that I’m a long-term investor means my glass is always half-full. Having arguably got a little frothy last year, the company’s valuation has now returned to a more reasonable level. Shares now trade at 11 times forecast earnings and come with a 5.2% dividend yield.

In May, Strix announced it was “maintaining expectations for the full year“, based on trading in 2022 so far. Product price increases across its entire range have been “successfully implemented” in the face of higher inflation. And manufacturing operations in China have not been severely impacted by the resurgence of Covid-19. That doesn’t exactly sound like a company in crisis to me.

I’m very tempted to top up at this level.

The post 3 AIM stocks I’d buy in July appeared first on The Motley Fool UK.

Shares Buffett has bought so far this year have included oil group Chevron, US insurer Alleghany and video game producer Activision Blizzard. I’ve been looking at similar sectors in the UK. I think I’ve found three shares that might be of interest.

#1: big value?

My first choice is FTSE 100 oil and gas giant Shell (LSE: SHEL). I think this business has many of the characteristics Buffett might look for in an investment.

Shell generates a lot of cash and is one of the biggest companies in the markets where it operates. This business also has global brand recognition and a huge consumer footprint.

One downside is this business still generates most of its profits from producing oil, gas and other petroleum products. If the energy transition happens more quickly than expected, Shell could face unexpected losses.

Personally, I think that’s unlikely. In my view, Shell’s strategy of focusing on its retail and energy trading divisions will give the group the data it needs to keep pace with changing demand.

Shell shares currently trade on just six times forecast earnings, with a 3.9% dividend yield. I think it’s just the kind of UK share Buffett might buy.

#2: A bargain 6.7% yield?

My next pick is £16bn insurer Aviva (LSE: AV). Buffett has a long history of investing in insurers and his recent $11bn deal to buy Alleghany is a good example of this.

Aviva is a business I know quite well, having followed the stock for a number of years. The group’s turnaround under chief executive Amanda Blanc has streamlined the group, cut debt and resulted in a recovery in dividend payments.

Although growth remains a concern, Aviva boasts a strong brand and a big share of its core markets in the UK and elsewhere.

Rather than splashing the cash on expensive acquisitions, Blanc has promised to return much of the group’s spare cash to shareholders.

Aviva shares currently offer a forecast yield of 6.7% and trade on less than 10 times earnings. I’d certainly be happy to add this stock to my portfolio. I think Buffett might too.

#3: UK gaming success story

Video games are one area where the UK has some serious talent. One company I’ve been following with interest for a while is Team17 (LSE: TM17), whose games include Worms, Overcooked and The Escapists.

This group develops some of its own titles, but also partners with third-party developers. This means it can share the risk of new games while still benefiting from big winners.

Team17’s share price has fallen by 45% over the last year as the pandemic-induced gaming boom has cooled. The risk is that sales and earnings will continue to slow as we all return to normal life.

If this happens, I think it will be a temporary glitch as the market recalibrates. Team17’s share slump has left the stock trading on around 18 times forecast earnings. For a growth business with 30% operating margins, I think that could be good value. Team17 is on my list as a potential buy for my portfolio.

The post Warren Buffett just spent $50bn! Here are three UK shares I think he’d buy appeared first on The Motley Fool UK.

Factoring in eSports revenue and console sales, the gaming industry is valued at over $200 billion. With the explosion of mobile gaming, the development of the metaverse, paired with the emergence of in-game economics, the industry is now a thriving microcosm that has transformed interactive storytelling.

The US and China are leaders in this space. However, the UK is slowly growing into a European powerhouse, with several companies gaining exposure during the pandemic gaming boom. And when investing in gaming, the UK has an ever-growing list of stocks that have become big global players.

What are gaming stocks?

Gaming stocks are companies listed on an exchange that primarily design, distribute or market video games. This is a broad classification that includes a variety of:

1. service providers,
2. software developers,
3. animators,
4. and graphic consultants.

Combined, they predominantly deal with the creation, launch and post-release support of video games.

Top gaming shares in the UK

Here are some of the top shares listed on the London Stock Exchange. These companies have the largest market caps and form the core of the UK gaming industry, giving you a detailed picture of what the top gaming stocks in the UK have to offer.

Frontier Developments

Frontier Developments is the studio behind popular titles like RollerCoaster Tycoon, Elite Dangerous and Jurassic World Evolution. And ithas been a British gaming mainstay for nearly three decades now. The company uses a multi-pronged strategy that involves licensing rights to popular franchises and also maximising post-release revenue through in-game purchases.

The company gained prominence during the pandemic gaming boom when its share price rocketed over 150% in just one year. But most of this growth came from players stuck at home during lockdown, snapping up some of its older releases. This shows the focus on quality, as many of its titles have longevity, something that is rare in the gaming world.

Building on their strategy, Frontier Developments acquired the licensing rights to the first F1 management game. At the time, this was an exciting long-term opportunity for the company to expand its sports portfolio. This is a similar strategy that Electronic Arts used with the FIFA and NBA 2K series. In the gaming world, this is a huge step ahead because sports management games generate steady revenue long after the initial release. However, due to poor sales upon release, the firm decided to cancel its F1 Manager 2025 project and terminated the F1license entirely.

Lukewarm reception of its latest titles have caused quite a bit of volatility in its share price, and the stock has since fallen from grace compared to its post-pandemic highs. But with the successful launch of Planet Coaster 2 and the continued expansion of its Jurassic World Evolution series, the company seems to be slowly making a comeback.

Devolver Digital

This gaming stock listed in the UK is the only big studio with broad exposure to the thriving American gaming market. Based in Texas, Devolver Digital has a very focused business model of building indie games that shake up the market. The company identifies as a developer-friendly platform that gives creators the tools to compete with the big players.

After the success of its Serious Sam series, this studio has been involved with over 50 successful titles, including the sleeper hit Hotline Miami, Carrion, Shadow Warrior and also published the global phenomenon Fall Guys (now owned by Epic Games). Devolver Digital is also making a huge push towards metaverse gaming, which is largely considered to be where the industry is headed in the next decade.

This gaming stock was listed on the FTSE AIM index in 2021 and, with its market strategy and global exposure, the company is looking to maximise the potential of indie titles.

Everplay Group

Everplay Group (previously known as Team17) has been belting out hits since the 1990s, getting a firm hold of the British indie games market. With popular titles like Overcooked, the Worms series, Hammerting and Blasphemous, the company’s focus on premium, squad-based, pay-to-play games is clear.

The company works with budding indie creators across the globe and acts as a distributor as well. Over 100 games have been launched under the Team17 banner since the late 90s. And today, Everplay continues to dominate the party game genre.

Since 2021, the company has also branched out to educational entertainment and gaming apps targeted at children under 13. This is a huge gaming niche and generates a lot of passive revenue.

Are gaming shares right for you?

Gaming stocks might not be for everyone. Traditionally, gaming shares are slightly volatile given the nature of the industry. The industry has become incredibly competitive, meaning even popular releases often get buried. CD Projekt Red’s Cyberpunk 2077 serves as a reminder of how even highly anticipated games can fail on initial release.

For investors looking at long-term gains from gaming shares, it is wise to look at the biggest shares, the catalogue of games, future projects, takeovers and potential collaborations. All these factors cause price fluctuations. And it’s easy to get caught up in the hype. After all, video game stocks can quickly generate a lot of interest in short bursts.

But with that being said, the industry looks like it is about to take the next big leap in entertainment with virtual world-building and the metaverse. Gaming could become a rewarding avenue for investors who follow the Foolish investing philosophy of being smart and choosing companies with robust values and financials with long-term gains in mind.

The post Investing In Gaming: Top UK Gaming Stocks of 2026 appeared first on The Motley Fool UK.

Gaming on the rise

Team17 is a British video game development company with a two-pronged approach. It creates and develops many well-known, premium games, but also partners with smaller independent developers to help them access the lucrative gaming market. As I write, it has over 90 games in its portfolio. Some of its best known titles include the Age of Darkness franchise, and Hammerting.

As I write, Team17 shares are trading for 718p. At this time last year, the shares were trading for 12% higher, at 818p. Many FTSE stocks have experienced their share price’s meandering due to current macroeconomic issues causing a stock market correction. 

For and against investing

FOR: Team17’s performance, recently and historically, has been excellent. I do understand that past performance is not a guarantee of the future, however. Looking back, it has seen revenue and gross profit increase year on year for the past four years. Coming up to date, a trading update released in January for the year ending 31 December was good. Performance exceeded management expectations. Full detailed results are due at the end of March and will show just how well Team17 did. Most of the FTSE stocks I am reviewing have a good track record of performance.

AGAINST: Although a lucrative market, the gaming industry is extremely competitive and includes many well known companies that produce blockbuster titles and have done so for many years. Names such as Microsoft and Electronic Arts spring to mind. Team17 is a smaller firm compared to these and could be out-muscled and outmanoeuvred in the long term. Gaining market share from household names is not easy.

FOR: A recent study conducted by global consultancy firm Accenture reported that the gaming industry has seen its numbers increase by half a billion players in the past three years. It is also predicting a further 400m new gamers by the end of 2023. Team17’s continued growth and success in a lucrative, burgeoning market could help boost its performance and any returns I hope to make.

AGAINST: At current levels, the Team17 shares look a tad expensive. It sports a price-to-earnings ratio of 42. This usually tells me two things. Firstly, any growth expected ahead could already be priced in. Next, there is a risk that market issues as well as any negative news could have a detrimental impact on the share price and overall investor sentiment. An example of this would be a flagship game receiving a negative review or reaction.

A FTSE stock I’d buy

Overall, I like Team17 shares for my holdings and would buy them. I keep an eye on growth markets and as a keen gamer myself, it is an industry I like to watch in particular. I like Team17’s approach with its indie gaming market accessibility with partnerships with newer developers. The gaming market is only set to grow and the FTSE AIM incumbent could end up commanding a decent slice of a very big pie, in my opinion. This could lead to increased performance and some nice returns for my holdings.

The post This FTSE AIM stock is primed for growth as part of a £6bn industry in the UK! appeared first on The Motley Fool UK.

With this in mind, here’s a growth stock listed on AIM I’d buy today.

A stock with explosive growth potential

The company is Team17 (LSE: TM17), a video games developer and creative partner for third-party gaming studios. Before I dig into the company, the video gaming industry is expected to grow considerably. According to Statista, the global market will be worth $269bn in 2025, up from $178bn in 2021. I view this as a big tailwind for Team17 if it can capitalise on the growth in the wider industry.

A major attraction for me with Team17 shares is the company’s financial metrics. Indeed, the business is able to achieve an operating margin over 30%. Not only this, but Team17 also generates double-digit returns on its capital base. With financial ratios so high, there’s a much better chance for excellent shareholder returns as the company continues to grow.

Team17 also released a trading update in January which was encouraging. Management said the company is continuing to trade above their expectations for the six months to 31 December, which completes a “solid performance in 2021”.

The full-year performance for 2021 does look good, in my view. Revenue is expected to grow over 9%, which should translate into a pre-tax profit growth rate of 17%. Things look even better next year though. Analysts are expecting revenue to grow by 24% in 2022, with an increase in pre-tax profit by 22%.

Risks to consider

Even though the video game industry is expected to grow, it’s still a competitive market. One new and popular game from another developer could steal market share from Team17. For example, games such as Fortnite and Minecraft were huge successes, and could threaten sales of Team17’s games.

Another risk for me to consider is that the firm has been acquisitive of late. Only recently, the company announced it was buying Astragon Entertainment for £83m. It’s to be funded by a placing of shares to raise gross proceeds of £80m. Astragon is a developer and publisher of simulation games, so I do view this as a good fit for Team17. However, there’s never a guarantee that acquisitions will be successful. The cultures of the different businesses may not blend well, or the acquiring company might overpay. It’s certainly something to monitor if Team17 continues on its acquisition strategy.

A UK share to buy

On balance, I think Team17 is a buy for my portfolio. It’s not without risk, just like any investment. But I think the potential return over the years ahead outweighs the risks at hand.

The post UK shares: 1 growth stock on AIM I’d buy today appeared first on The Motley Fool UK.

Powering up my portfolio

The video games market is tipped to double in size between 2020 and the end of the decade. It’s the sort of industry growth that as an investor I find hard to ignore. It’s also a trend I’m considering exploiting by buying shares in developer Team17 Group (LSE: TM17). I already own shares in software development services provider Keywords Studios, incidentally.

Team17 is the brains behind many popular titles including Overcooked! and The Escapists. It has been taking steps to pump up its product pipeline and in 2020 it launched a record 10 brand-spanking-new games. I actually believe Team17 could become a takeover target as consolidation in the games industry takes off. Take-Two Interactive has just sealed a $12.7bn deal for FarmVille creator Zynga to bolster its games portfolio.

I am concerned by Team17’s high valuation, however. The tech stock currently trades on a forward price-to-earnings ratio of 42.7 times. Such a reading could prompt a sharp share price drop if earnings forecasts start to look fragile. For example in the event that a title receives a poor critical reception that subsequently smacks sales.

Team17’s share price has struggled for momentum more recently. Over the past year it’s actually fallen 12% in value. However, as a long-term investor I think this drop could be an attractive investment opportunity.

Heating up nicely

Manufacturers in the UK face a significant threat to earnings as supply-side problems mount. Kettle safety control manufacturer Strix Group (LSE: KETL) has warned in recent months that supply chain disruption and soaring raw material costs remain dangers for its business.

This threatens to be a lasting problem too following Britain’s exit from the EU. Two-thirds of UK manufacturers have seen their businesses affected by Brexit red tape, according to a new survey. Some 56% of respondents expected these problems to worsen in 2022 too as new customs checks come into force and new product labelling rules begin.

The question is whether these obstacles are enough to discourage me to invest in a particular UK share. In the case of Strix Group I believe the profits outlook is bright despite these supply-side problems.  Sales at the business soared 58% in the first six months of 2021, latest data shows. This was thanks to solid organic growth as well as the acquisition of water filtration specialist LAICA in 2020.

The business aims to double turnover over a five-year period and recently opened a new manufacturing facility in China to help it achieve this goals. The company has risen almost 30% in value over the past 12 months but at 290p is down considerably from August’s record highs above 380p. I reckon this provides me with an excellent dip buying opportunity.

The post 2 ‘secret’ UK stocks to buy in 2022! appeared first on The Motley Fool UK.