Say “growth shares” to someone and they might think of US tech stocks and exorbitant price-to-earnings multiples. However, growth shares do not always have to be expensive or American. You can pick up growth shares at a reasonable price right here in the UK.
I have found a bunch of shares that all have impressive track records of growth in earnings and hefty returns in investment. The coronavirus market crash knocked their prices down or stalled their ascents. All are cheap, trading at under 15 times earnings per share. I particularly like the look of two. They are Renew Holdings (LSE: RNWH) and HgCapital Trust (LSE: HGT), and I think they are some of the best UK growth shares to buy today.
Best UK growth share?
Renew Holdings provides engineering support services in the regulated UK rail, infrastructure, energy, and environmental markets. It also has a sideline (about 10% of sales) in high-quality residential and science building. Renew’s revenues tend to be stable as they are underpinned by long-term and regulated budgets.
These factors did not stop investors fleeing the stock during the coronavirus market crash; Renew’s share price was down 45% at one point. To shore up the balance sheet in the crisis, the dividend was cut, which also contributed to investors fleeing the stock. The share price has recovered, but even now sits at least 20% below its pre-crash highs. This makes the stock cheap, trading at just 14.66 times trailing 12-month earnings per share.
Renew Holdings has grown its earnings per share by an impressive 47.16% over the last 10 years and has averaged a return on investment (ROI) of 25.17% over the last five years. During the worst of the coronavirus lockdown, 80% of Renew’s activities continued because the work was deemed essential. As the economy picks up the remainder should return. There has also been an acquisition of a specialist road-engineering firm. This gets Renew exposure to road infrastructure along with its existing exposure to the UK government’s £640bn infrastructure package.
I think Renew is one of the best UK growth shares to buy today. There are plenty of reasons to think it will continue its robust earnings growth after the pandemic passes. That growth is available on the cheap today.
Growth in private
Mention unlisted companies and one might think of start-ups and high risk, but HgCapital is not a venture capital outfit, although it does invest in private companies. HgCapital’s portfolio contains approximately 30 fairly mature companies in the software and services business. HgCapital trades on the London Stock Exchange but provides investors with exposure to private equity. Private equity exposure should be diversifying for a public equity portfolio (which many Fool UK readers will have) and private equity returns (although murky) have tended to outperform those of public equity. Another reason I believe HgCapital is one of the best UK growth shares to buy right now is that its portfolio is not significantly exposed to those sectors hit hardest by the coronavirus.
Underlying portfolio earnings have grown by 30% over the last 10 years, and the five-year average ROI is 16.7%. An experienced management team and exposure to high-growth sectors should see that performance continue. Right now, HgCapital stock offers growth at a reasonable price, and it traditionally pays a dividend.
The post I think these are some of the best cheap UK growth shares to buy today appeared first on The Motley Fool UK.
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James J. McCombie has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020