In this article I’m looking at a couple of top UK growth shares. Here’s one I already own, and another that I think could be too cheap to miss.
One of my favourite ISA buys
I don’t believe there’s a more reliable growth share out there than Bunzl (LSE: BNZL). Not even the worst public health emergency for a century could derail the FTSE 100 share’s long record of annual earnings growth. Instead the Covid-19 crisis has turbocharged demand for its cleaning products and personal protective equipment (or PPE).
This resilience is why I love Bunzl and have added it to my own Stocks and Shares ISA. The UK company supplies a broad range of products and services for a wide variety of industries and sectors. As such it has the sort of strength through diversity to let it weather most crises. Bunzl actually saw pre-tax profits soar 23% in 2020 in spite of the public health emergency.
I’m expecting another sunny trading update when Bunzl releases first-quarter trading numbers on Wednesday 21 April. But remember: this Footsie firm operates in highly-competitive markets and so even peddling extremely hard is no guarantee of future earnings growth.
Another top UK growth share
I think that investing in recruiter SThree (LSE: STEM) could be another good idea right now. Positive news flow across the industry continues to come thick and fast (the Robert Walters share price just hit multi-year highs on the back of reassuring first-quarter numbers). There’s still a long way to go but now could be a good time to buy this particular UK reopening share.
SThree also put out positive numbers of its own in March. Then it said that “we’ve seen improved underlying activity across each region of the group during the first quarter”. Consequently net fees in the three months to March were down just 1% year on year. This is better than the 7% and 14% drops endured in the fourth and third quarters of 2020 respectively.
This improved momentum has lifted the SThree share price to its most expensive since April 2017, at close to 400p per share. But despite this recent strength SThree’s shares still look mightily cheap on paper. City analysts think the company’s annual earnings will climb 41% in the current fiscal year (to November 2021). This results in a forward price-to-earnings growth (PEG) ratio of just 0.6.
Conventional thinking suggests that a UK share trading on a reading of below 1 is undervalued by the market. Though be warned that the third wave of Covid-19 sweeping across Europe could put paid to these current bright earnings forecasts. Germany is SThree’s single largest market (responsible for around a third of group net fees), while the Netherlands and the UK are also important territories. It’s quite possible then that the recruiter’s share price could sink rather than surge.
