Growth is the goal of a lot of investors, but it can be hard to find. Here are three diverse UK shares I think could double over the next few years. The reason I would consider adding each share to my portfolio varies. So I explain what I see as the possible share price growth driver for each in the next several years.
High growth focus
Let’s start with a company that clearly looks like a growth share: S4 Capital. The company works in an area which is seeing rapid growth: digital advertising. Add to that S4’s own ambitious agenda to double revenues and profits organically within three years and it’s easy to see the growth theme here.
But do growing revenues and profits mean a growing share price? The S4 Capital share price hit a new high today and has more than doubled in the past year. That pace is hard to sustain. But the company has an aggressive growth strategy, talented team and digital only business model which makes it more scalable.
Such aggressive growth targets brings risks as well as potential rewards. If the company’s rapid expansion dilutes its quality of output, that could hurt revenues.
Recovery play among UK shares
A company I also think could double in the next few years, for very different reasons to S4, is defence contractor Babcock (LSE: BAB). Here the story is not so much about growth as recovery.
Babcock is a key contractor to the Royal Navy, among other business activities. It has gone through a challenging several years, changing its accounting policies and replacing its leadership. That has led to the Babcock share price falling dramatically. However, the current management has started to rebuild investor confidence with a thorough accounting review. The company is strategically refocussing, selling off some businesses in the process. At the heart of Babcock lies a relatively stable maritime business with strong customer demand. If management is able to focus the organisation on that, I think the company could improve its performance in coming years. That could be good news for the Babcock share price, which has increased 16% over the past year.
Babcock remains a risky prospect though. There are a lot of moving parts here as the company remains in flux. That could easily distract management from the hard work needed to grow the business.
UK shares for high street recovery
My third pick among UK shares I think could grow strongly in coming years simply rests on a company doing the basics well.
The discount retailer B&M European Value Retail might not be an obvious candidate for share price growth. It competes in the financially competitive retail sector. However, B&M’s strong brand, retail expertise and appealing prices have helped it grow at speed. In the past four years, revenue increased at a compound annual growth rate of 19%. Post-tax profit in the same period grew at a compound annual rate of 31%.
I think B&M can keep growing, by opening new branches in the UK and expanding its French operations. The company’s strong performance in recent years has inspired my confidence in the management. But risks include increased competition from the expansion of other discount retailers. That could damage profit margins.
