2 potential champion UK growth stocks to consider buying in December

Are we heading for a resurgence in FTSE growth stocks?

The stock market looks like it should end the year strongly. And interest rates appear increasingly likely to fall. That could mean a swing in favour of growth investing. Here are two I think investors should consider right now.

#1: Speedy Hire

With November’s first-half results update, Speedy Hire (LSE: SDY) CEO Dan Evans said: “Despite subdued markets, we are gaining market share and winning significant long-term contracts, leaving us far better positioned to take advantage as and when market conditions improve.”

The company did record a first-half loss before tax of £15.1m. And we’re still on for a full-year loss. But we saw underlying operating cash flow of £44.6m, which the board says should substantially help deleveraging in the next 12-24 months.

The “as and when market conditions improve” bit is the main sticking point. And I think the shares could remain weak at least until the full year is up. Or maybe even until we see the first concrete signs of getting back to profit.

Revenue boost

But Speedy Hire has a tie-up with ProService (previously HSS Hire) which the boss says should “generate £50m-£55m of annualised revenue and significant earnings accretion in its first full year after integration.”

There’s a forecast price-to-earnings (P/E) ratio of 7.3 for 2027, when analysts expect to see those profits returning. By the standards of potential multi-year growth stocks, that looks low to me.

The interim dividend was cut “in line with the previously guided rebasing of dividend payments,” announced in October. It should mean a total dividend of 1p per share. But that would still yield a decent 3.7% on today’s price.

#2: Keller

Ground engineering specialist Keller (LSE: KLR) is valued on a low forward P/E of 8.2. And it would drop as low as 7.6 on 2027 forecasts.

It all hinges on predicted steady growth in earnings per share between now and then. But in a November trading update, CEO James Wroath said the company “remains on track to deliver a full-year performance in line with market expectations.” So we should be on to hit an analyst consensus for underlying operating profit of £214m.

Management seems to think the shares are undervalued too. At least, that’s what the latest £25m share repurchase programme says to me — following from on a previous £25m buyback completed in the first half of the year.

Strong cash

On the liquidity front, the board is targeting a net debt/EBITDA range of between 0.5x and 1.5x. Anything above 2x and I might start getting a bit worried. But that sounds solid to me.

Profit margins in the business aren’t the biggest. And an average analyst target price of 1,890p is only 16% above the price at the time of writing — so not all that stretching a growth target. But even with the shares up 150% over five years, I still rate Keller as a growth stock to consider.

Oh, and there’s a dividend on the cards from this one too. The 3.2% yield would make a nice extra.

The post 2 potential champion UK growth stocks to consider buying in December appeared first on The Motley Fool UK.

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Alan Oscroft 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.

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