Investor appetite for UK shares has eroded slightly on Thursday as a mix of Covid-19 fears and inflationary concerns weighed. The FTSE 100 for instance has fallen more than 1% from yesterday’s close. Not all London-quoted shares are struggling for traction, however. Take SThree (LSE: STEM) for example.
Prices of the recruitment specialist have spiked 7% on Thursday to 455p per share. They had hit fresh record peaks of 459.5p earlier in the session before paring gains. The reason why? The release of further brilliant trading numbers for the start of 2021.
Profits to beat expectations
In its latest trading release, SThree — which concentrates on the Science, Technology, Engineering and Mathematics (or STEM) sectors — said that business activity was “stronger than expected across the majority of the group’s portfolio” in the three months to May.
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It witnessed “high levels of demand” related to Life Sciences and Technology roles throughout its second fiscal quarter. The firm added that “there have been continued strong performances from the US, German and Dutch businesses.”
The recruiter noted that uncertainty persists around the second half of the financial year. This is due to the emergence of Covid-19 variants and the impact of annual leave backlogs for contractors, as well as for its own employees.
However, SThree said that its strong first-half showing leads it to believe that pre-tax profit for the full year to November 2021 will be “materially above market consensus.” Current broker consensus sits around the £39.7m mark, the company noted.
What they said
Commenting on SThree’s robust recent results, chief executive Mark Dorman said that “the strong performance we have seen across the second quarter reflects the high levels of demand that exists for our STEM offering.”
He added that while “uncertainty remains, we have proven our ability to execute whatever the circumstances, giving us confidence for the remainder of the year and beyond.”
Why I’d buy SThree shares today
Even though SThree’s share price is still going from strength to strength, I think the UK recruitment share still offers terrific value for money. As I type, City analysts think earnings per share will rise 40% year-on-year in fiscal 2021. This leaves the company trading on a forward price-to-earnings growth (PEG) ratio of 0.7. A reading below 1 suggests that a stock is undervalued by the market.
Yet as SThree pointed out, the trading environment remains packed with uncertainty. Any fresh upsurge in Covid-19 cases could leave the company’s recent recovery in tatters. Still, as a long-term investor I’m tempted to buy given that the number of STEM jobs looks set to balloon as the world becomes more digital (as per a recent World Economic Forum report). I’d happily add this soaring UK share to my Stocks and Shares ISA today.
