Trying to predict which UK shares might double in value over 2021 isn’t easy. With Brexit negotiations rumbling on and the coronavirus pandemic digging its deadly heels in, next year could prove just as unpredictable as this year.
But let’s stay optimistic. Thanks to their ability to rapidly increase revenue and profits, I think there are many small-cap growth stocks whose share prices could really shine. Here are three with strong potential.
Assuming bars, pubs, and sporting venues are allowed to fully open by spring, I think beverage firms such as AG Barr (LSE: BAG) could do well. Drinks companies do have a habit of bouncing back firmly after general market setbacks. This time should be no different.
That’s not to overlook just how hard the last year has been. Revenue and pre-tax profit have tumbled in 2020 due to the incredible headwinds faced by the hospitality sector. I’m also under no illusion that it will take some doing for Barr to recover back to the 950p mark it hit in 2019.
Then again, it’s got a lot going for it. In addition to its flagship IRN-BRU brand, Barr looks financially solid. The business had over £30m in net cash when it last reported to the market.
Although not currently paying out dividends, management does expect cash returns to resume in 2021 too. That’s the sort of bullish talk I like to hear.
Right space, right time
As widely expected, the share price of infection prevention specialist Tristel (LSE: TSTL) has enjoyed an excellent 2020. The £250m business is up almost 40% year-to-date. That’s despite sales being lower in early 2020 due to many operations being deferred by the pandemic.
Positively, CEO Paul Swinney revealed last week that Tristel had seen a “substantial recovery in demand” for its products since October. Pre-Brexit stockpiling by the NHS was a factor.
One reason the shares could continue rising in 2021 relates to the company winning approval from various regulatory bodies. In the US, Tristel has already spoken of “very encouraging progress” relating to its FDA test programme for its ‘Duo for Ultrasound’ disinfectant. Additional positive feedback has come from the Canadian regulator on its ‘Duo for Ophthalmology’ submission.
Trading at 40 times forecast earnings already, at least some of this potential is already priced in. Even so, Tristel is a highly profitable, niche business with excellent finances. If another market crash presents me with an opportunity to do so, I’m backing the truck up.
Ready to strike
For those of a risk-tolerant nature, ten-pin bowling firm Hollywood Bowl (LSE: BOWL) could also be worth backing.
While its offering is easily replicated, I think Bowl has a chance of recovering from the pandemic more speedily than, say, the UK’s battered airlines. A few games of bowling is far more affordable to families in tricky times than a holiday abroad. Even those with the means to travel when restrictions lift may adopt a ‘wait and see’ approach.
Only last week, the company reported it had seen “strong customer demand and better than expected performance” when it reopened after the first lockdown. That’s got to be encouraging.
The new tier 4 restrictions won’t help things in the near term. However, this may provide new investors an opportunity to strike on UK shares like this before the real recovery kicks in.
The post 3 UK small-cap growth shares I think could DOUBLE in 2021 appeared first on The Motley Fool UK.
Paul Summers owns shares of Nichols and AJ Barr. The Motley Fool UK has recommended AG Barr, Hollywood Bowl, and Nichols. 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.
Motley Fool UK 2020