Best shares to buy now: the top growth stock I’d snap up with £1k

I think one of the best shares to buy now is top growth stock Team17 (LSE: TM17). Last year was a blowout performance period for this global gaming group. It released more titles than any previous year, generating overall revenue growth of 34%. 

With a profit margin of 47%, pre-tax earnings jumped 36% year-on-year to £26.2m. 

Whenever I look at growth stocks, I’m always wary about their long-term potential. I often see companies report one or two years of impressive growth but struggle to maintain this trajectory.

This is especially true with small- and medium-sized businesses. These often struggle to compete against larger competitors, which move quickly to defend their market share. However, I think there’s a good chance Team17’s growth isn’t just a flash in the pan. That’s why I believe this is one of the best stocks to buy now and I’d invest £1,000 in the business. 

Best shares to buy now

Over the past six years, the company’s sales and profits have grown at a compound annual rate of 52% and 48% respectively. 

There are two factors behind this record. Firstly, Team17 has been investing heavily in its product pipeline, developing new games and products which have ultimately helped it enter new markets and acquire new customers. 

It looks as if this trend will continue. The company has a diverse pipeline of launches scheduled for this year. What’s more, last year, it increased its headcount by 25% and acquired Yippee Entertainment Limited, which helped the firm establish a new development studio in Manchester.

This ever-growing team of developers and creatives should underpin the group’s expansion plans. 

As well as investing for the future, Team17 also profits from past releases. Sales from its back catalogue of games made up 78% of revenues in 2020. This is essentially a passive income stream for the group that costs nothing to produce.

And the more games the company can develop, the larger its back catalogue becomes. This generates more recurring revenue, which can then be used to create new products. And the circle continues. 

Portfolio of growth stocks 

Team17’s growth plans and the company’s ever-growing back catalogue are the two reasons why I’d buy this business for my portfolio of growth stocks. Few other businesses exhibit these qualities, which is why I believe this is one of the best shares to buy now. 

Unfortunately, like all investments, the company’s growth isn’t guaranteed. Potential risks include intellectual property challenges, rising staffing costs and higher marketing costs. The firm may also struggle if a more significant competitor decides to edge into its market.

Indeed, with a market capitalisation of around £918m, at the time of writing, Team17 is still a relatively small business in the world of technology. 

Despite these risks and challenges, I’m excited by the company’s future potential. That’s why I’d buy the gaming stock for my portfolio with £1k today.