Investors have been talking about a V-shaped recovery. What that means is a sharp upturn from the dramatic stock market fall we saw earlier this year. If it happens, there could be dramatic gains. These growth shares could, in my view, be among the winners.
Red hot sector
There’s been quite a buzz around gaming and especially around Codemasters (LSE: CDM) in recent months. It’s not hard to see why. With schools off and many people not working, gaming has become a hot sector. It’s one of the industries that has benefitted from the virus. Codemasters, producer of racing games, has seen its share price increase by about 20% so far this year.
The shares are not cheap – but then that’s often the case for high-growth shares. Other stock market listed gaming companies also have high price-to-earnings ratios. The key point whether the company can keep on delivering strong growth and meet investors’ expectations. I believe it can. That means the share price has growth potential.
Helping this is the fact that Codemasters has been able to confirm a date for the Fast & Furious game which was delayed due to the rescheduling of the film. It will now be launched in the second quarter of the financial year.
The group serves a niche that will keep paying a premium for games year after year. A move to digital sales is helping further bolster margins. Codemasters strikes me as a great growth share.
A growth share that’s having to adapt
Softcat (LSE: SCT) is another highly rated share with growth potential. The technology company, known as a reseller, has a trailing P/E of 32. I’ve been very positive about Softcat in the past and continue to think it should do well. However, the business may face some additional challenges now if employees increasingly work from home.
I’m sure it can adapt. The company has said that it’s had fewer orders but the ones it has secured have tended to be higher value. With a diverse range of customers I don’t see this change as troubling for shareholders.
The CEO has said of the situation: “Some of the relationships we already had with customers have probably deepened, and those bonds have been forged in an even stronger fashion through remote working… but we found that cold calling has been more challenging”.
Overall, given that Covid-19 has shone a light on the need for companies to have good technology to support safe remote working, there are tailwinds for the share price.
Softcat is less of an obvious winner than Codemasters from the current situation. But it still has potential to grow within the UK and Ireland and beyond.
Both these shares are highly rated and aren’t really hidden gems. They do have qualities that make them winners, and often top performing shares keep winning. That’s why if a V-shaped recovery can be sustained, I think these shares have huge growth potential.
The post Expecting a V-shaped recovery? I think these shares have growth potential appeared first on The Motley Fool UK.
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Andy Ross owns no share mentioned. The Motley Fool UK has recommended Softcat. 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