When it comes to picking UK shares to buy, I’m keen on fast-growing companies such as Inspecs (LSE: SPEC). The company designs and manufactures eyewear frames and optically-advanced spectacle lenses.
Why I think Inspecs is one of several UK shares to buy
I like several things about the firm. Firstly, it has an impressive record of growth. Since 2016, revenue, cash flow and earnings have all been rising fast. However, this year, Covid-19 has caused a temporary setback in progress.
Secondly, the company appears to be well-financed. Today’s half-year results report reveals there was a net cash position on the balance sheet of $10.5m at the end of H1 on 30 June.
And thirdly, the company is new to the stock market having joined the FTSE AIM market in February. I like to latch onto my potential millionaire-maker growth stocks when they’re young and vibrant. That’s when the boardrooms often have keen, entrepreneurial executives who are determined to make their mark.
However, I don’t think it’s a good idea to put all my investable funds into one share. My plan to make a million from growth stocks like Inspecs involves buying the shares of several candidates and compounding my gains over years.
Inspecs says its customers include global optical and non-optical retailers, distributors and independent opticians. The firm’s distribution network covers more than 80 countries with around 30,000 points of sale. Last year, just over 75% of its sales came from abroad and almost 25% from the UK.
Indeed, Inspecs has operations across the globe with offices in the UK, Portugal, Scandinavia, the US and China. Meanwhile, manufacturing takes place in Vietnam, China and Italy. Yet the firm’s market capitalisation is just £142m, which suggests there’s plenty of potential for the business to maintain its growth trajectory.
Organic and acquisitive growth
The directors’ growth plan involves the pursuit of both organic and acquisitive expansion and the extension of the manufacturing capacity. And construction work on a new plant in Vietnam has continued through the pandemic and will “shortly” be ready for production. Meanwhile, the acquisition of The Norville Group Ltd completed after the end of the reporting period.
Inspecs kept trading through the lockdowns, although business declined. Today’s figures show a 45% decrease in revenue year on year with an EBITDA slump of 89%. However, there was a recovery in sales and orders at the end of the first half which “continued to accelerate.” Looking ahead, the directors point out that sustained trading recovery depends on whether more lockdowns arrive or not.
City analysts following the firm are optimistic and have pencilled in a robust three-figure surge in earnings for next year. And with the stock near 190p, the forward-looking earnings multiple for 2021 sits just above 14. I see price weakness now as an opportunity to buy some of the company’s shares.
