The Alternative Investment Market (AIM) can be a great place to find growing companies. I’ve been screening the market and think these two AIM shares are buys for my portfolio today. Let’s take a closer look.
An AIM share for digital identity
The first company is GB Group (LSE: GBG), a software provider for digital identity solutions. It operates through three divisions: Identity, Location, and Fraud.
There are a lot of reasons I like the stock. Firstly, it’s able to generate excellent quality metrics, such as consistently high (and increasing) operating margins. This shows me that the company is becoming more profitable over time, which gives scope for things like share buybacks and dividends.
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I also see a structural tailwind for the company in the months and years ahead. Customer activity is moving online more nowadays, so GB Group’s identity software solutions will be in increasing demand, in my view. Looking ahead into next fiscal year (the 12 months to 31 March 2023), and growth seems to be improving. Revenue and net profit are expected to grow by 26% and 24%, respectively. This means the shares trade on a price-to-earnings multiple of 27, which is reasonable for a technology company growing by double-digits to my mind.
There are still risks to consider, of course. For one, GB Group disposed of two businesses recently – Marketing Services and Employ & Comply – which could have disrupted the overall Group performance. GB Group is also acquisitive, so this brings execution risk.
But on balance, I think this is a top technology company on AIM. So I’d buy the shares today.
A real estate investment trust
The next AIM share is Warehouse REIT (LSE: WHR), which is a real estate investment trust (REIT) specialising in managing a portfolio of warehouse properties.
A main reason I’m bullish about Warehouse REIT is the growth in e-commerce. This was given a huge boost during the pandemic. Indeed, online retail sales in the UK reached just under £100bn in 2020, and up from £76bn in 2019. A crucial part of e-commerce is the logistics infrastructure behind the scenes. Warehouse REIT operates a portfolio of urban warehouses across the UK as part of this infrastructure. Its tenants include big names such as Amazon, DHL, and Asda.
Profit growth has been excellent recently. For the 12 months to 31 March 2022 (FY22), earnings per share (EPS) is expected to increase by 18%. In the following FY22, EPS is forecast to grow again at a still reasonable 12%. Based on a forward price-to-earnings ratio, the shares are valued on multiple of 23. I consider this fair for the earnings growth. Not only this, but the price-to-net-asset-value is only 0.9, which I view as cheap relative to Warehouse REIT’s high-quality property portfolio.
One thing to bare in mind about REITs is the occupancy rate. Currently, Warehouse REIT’s occupancy rate is high at 94.6%. But it still means over 5% of the property portfolio is untenanted. If this occupancy rate declines, then the profits will certainly fall.
Overall, though, I think this is a quality AIM share to add to my portfolio today.
