One thing I look for in UK growth stocks is a story about why business expansion can continue. The history of growth can make stocks more attractive to my portfolio. But what I’m really looking for is a series of reasons that make me believe that growth can continue into the future.
In the past 12 months, a share of growth in the UK has more than doubled. Nevertheless, I believe it can still move upwards in the future. why is that.
The UK’s share of growth has more than doubled
The share in question is the digital advertising agency S4 Capital (London Stock Exchange: SFOR)It has risen by 115% in the past 12 months and hit a new high today, breaking the price level of £7.50 for the first time. Since I chose it as my target in December last year, the stock price has risen by 50% Highest share in the UK in 2021.
What is the story behind the rapid rise in S4 Capital’s stock price? The company was founded by Sir Martin Sorrell, an advertising veteran. Unfettered by traditional business, he focuses on what he believes is growth-digital media. Not only did he invest his own funds, but his reputation also attracted the support of Manchester City investors. This allows the company to grow rapidly through acquisitions. This year, the company borrowed funds to increase its acquisition funding. This suggests that acquisitions may continue to drive growth.
Strong organic growth
So, is S4 just an old story of rapid development of the company by locking in the acquired company?
In a word: no. The S4 growth strategy goes far beyond this. Its three-year goal is to organically double revenue and profits. This is very ambitious, even though it actually raised its growth target for this year, management is confident in the company’s prospects.
Behind this confidence, there are many factors that I think support the UK’s growth share. As the company expands, it is more capable of winning jobs from large multinational companies that want global partners. Its growing reputation for work quality should help it expand the size of at least some of its existing customer accounts.Plus The rising trend of demand for digital advertising helps promote many ships, Including S4.
These elements may help drive the company’s success in the coming months and years. The interim results are scheduled to be announced next month. If they continue to show a surge in revenue, I think this may help further boost S4 Capital’s stock price.
UK growth shares risk
But any share is risky. Growth can be costly, especially in potentially lucrative developing industries where competitive pressures continue to increase. This will also reduce profitability.
Although S4 places great emphasis on digitization, it also relies on personal relationships with customers. This means that the departure of any key personnel is another risk that may harm S4 Capital’s stock price.
My opinion on S4 Capital
Diversification across other business units and stocks helps me manage risk.
I will consider increasing the S4 Capital position in my portfolio at the current stock price. I am excited about the strong growth story of S4 and hope that even after it climbs rapidly, there is still a way for further growth.
Christopher Ruane owns shares in S4 Capital. The Motley Fool UK has no position in any of the aforementioned stocks. The views expressed by the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we made in subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that taking into account different perspectives, We are better investors.