I own CVS Group in my Stocks and Shares ISA. It’s one of the best UK stocks I’ve bought recently; it has more than doubled in value since I purchased it in February 2020. Animal medicines manufacturer Animalcare Group (LSE: ANCR) has also rocketed over the past year and a half. And I think it could rise again when interim results are released on Tuesday, 28 September.
I first bought CVS Group because the amount people spend to take care of their animals has soared in recent years. The onset of Covid-19, and the subsequent impact on pet adoption rates, has given UK shares like this an extra shot in the arm too. Latest financials from Animalcare showed that the boom in companion animal ownership lifted revenues 13% higher between January and June as demand for its drugs soared.
Buying pharmaceutical shares can be risky business. Drugs can fail at the testing stage and regulators can refuse to sign a product off for sale. This can create mammoth additional costs and leave a gaping hole in the revenues column.
What’s more, Animalcare’s high valuation leaves the stock in danger of a sharp share price reversal if it does indeed encounter such problems. City analysts think earnings at the UK healthcare share will rise 4% in 2021. Consequently it trades on a hefty forward price-to-earnings (P/E) ratio of around 33 times.
Why I’d still buy this UK share
That said, I’d still consider investing in Animalcare today. This is not just because the rate at which the animal drugs market is set to explode. Statista says the animal medicine market will be worth $68bn by 2023, up more than 60% from 2019 levels.
It’s also because Animalcare has a packed pipeline of products such as canine osteoarthritis pain reliever Daxocox which is set for launch in late 2020. As well, I think the pharma play’s decision to concentrate on higher-margin novel products over generic drugs could pay off handsomely.
The A Team
Team17 Group (LSE: TM17) is another top UK share that doesn’t come cheap. The number crunchers think earnings here will rise 5% in 2021, resulting in a forward P/E ratio of approximately 41 times.
However, I’d take advantage of a recent share price slump for the video games developer. Indeed, I’d buy it with one eye on results which are due to come out (on Tuesday, 14 September). I think this could remind the market of its brilliant investment potential as the video games market goes from strength to strength. Recent data shows the gaming industry is now worth more than the movie and music industries combined.
Team17’s broad selection of popular games helped revenues surge 34% in 2020 and 43% the year before that. Now the video games market is massively competitive and there’s no guarantee that a future title will prove a hit. But I like this UK share’s track record and think it could be one of the best stocks I could buy to ride the gaming revolution.
Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.
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Royston Wild owns shares of CVS Group. 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.