A cybersecurity growth stock

Darktrace (LSE: DARK) started its time as a public company extremely strongly. In fact, in a matter of months, the Darktrace share price was able to double, and by October 2021, it had reached over 900p. Things have been far less pretty since October however, with the cybersecurity firm sinking over 60% to 360p. Over the past year, the firm has still delivered a small return of 5%. 

Despite the drop, there hasn’t been too much wrong with the company’s performance. Indeed, in the recent Q3 trading update, there was strong growth across the board. Revenues managed to climb 50% year-on-year to over $100m, and the company added 359 net new customers. Forward guidance was also raised, with revenue growth for the whole year now expected to total over 46%.

There’s a price to pay for this growth, however. Darktrace trades with a price-to-sales ratio of nearly 6, which is far over the average for UK shares. Further, the firm is nowhere near profitability. In the current macroeconomic environment, where inflation erodes the value of future earnings, this is a problem. It explains the reason why the firm has struggled in recent months. 

But I’m still tempted at current levels. For example, Cloudflare, a US peer, trades on a price-to-sales ratio of around 25 and is experiencing similar revenue growth to Darktrace. This indicates that Darktrace may now be overly beaten down. Therefore, I’m tempted to buy. 

A housebuilding share

Housebuilders have also struggled recently, due to an expectation that house prices will decline amid rising inflation and higher interest rates. There’s been some evidence of this recently, with Zoopla noting that the proportion of sellers reducing their asking price has increased. This has seen housebuilding shares suffer collectively, with Bellway (LSE: BWY) falling 36% in the past year. 

But the company’s recent performance has been strong. In fact, in the recent half-year trading update, operating profits were able to increase 11.6% to £330m. This allowed the interim dividend to rise by nearly 30%, giving Bellway a current dividend yield of 6%. It’s also covered three times by underlying earnings, leaving plenty of cash for reinvestment. 

Despite fears of declining demand for housing, as of March 2022, Bellway had a forward order book of 7,491 homes. It also expects operating margins of 18.5%, far higher than in previous years. This shows that the Bellway share price doesn’t reflect the current financial position of the company. 

With a price-to-earnings ratio of under 6, I feel that the shares are now too cheap. Therefore, I’m willing to disregard the risks of a cooling housing market and buy some Bellway stock today. 

The post 2 no-brainer UK shares to buy on the dip appeared first on The Twelfth Magpie.

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Stuart Blair 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.