The Next Fifteen Communications Group (LSE: NFC) share price has responded strongly to the latest financials, released on Tuesday. At 984p, the UK media share was last trading 4.6% higher on the day.
The robust recovery in the marketing communications market has helped drive trading levels above all Next Fifteen’s expectations. The AIM company saw revenues shoot 40% higher in the three months to July, it said today, with organic sales improving 29% from a year earlier.
Improved trading in the second quarter pushed revenues for the half year 31% higher year-on-year (or 23% on an organic basis). Next Fifteen added that it had enjoyed “strong performances across all segments and geographies” too. Consequently it now expects results for the full fiscal year to January 2022 to beat its prior estimates.
At the moment this UK share trades on a slightly-toppy forward price-to-earnings (P/E) ratio of around 20 times. Next Fifteen said that it expects sales growth to moderate in the second half, though if trading slows faster than anticipated such an elevated valuation could bring the share price crashing down to earth again.
That said, I’d still buy the company for my own shares portfolio. City analysts expect earnings here to jump 14% in fiscal 2022. And today the business said it was planning to accelerate investment to bolster long-term growth, too. Its strong balance sheet could lead to further earnings-boosting acquisition activity as well.
A cheap UK share I’d also buy
Costain Group (LSE: COST) released fresh financial results on Tuesday. But investors haven’t been bowled over by news coming out of the UK infrastructure and engineering share and, at 62.3p per share, the small cap was last 1.6% lower on the day.
Costain bounced back into the black in the first half of 2021, it said, recording pre-tax profits of £9.1m for the period. This compares with the £92.3m loss it was forced to eat a year earlier.
Revenues at Costain rose 21% year-on-year to £556.8m, while the business chalked up £334.3m worth of new contracts in the first half. Its order book sits at around £4bn, meanwhile, giving the company strong visibility for the remainder of 2021 and beyond.
It’s possible that the UK share could struggle again if the Covid-19 crisis gets out of control. But as a long-term investor I think Costain offers plenty of investment potential as infrastructure spending in Britain takes off. Major projects include work with Highways England to upgrade the region’s road network, and with HS2 to get the huge railway project up and running.
Besides, at current prices I think Costain could be too cheap for me to miss. City brokers think earnings here will soar 33% in 2021. This leaves the small cap trading on a forward price-to-earnings growth (PEG) multiple of just 0.3. A reminder that any reading below 1 suggests that a stock could be undervalued. In addition to this Costain offers a juicy 4% dividend yield today, giving me something to sink my income-seeker teeth into.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Next Fifteen Communications. 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.