The UK markets have been increasingly volatile over the last month or so. Over the last year, the FTSE All-Share is down about 8%. But, since 2002, the same index has moved from 1,970 to 3,770 points. I prefer to look to the long term.
I see the recent declines in UK stock prices as opportunities to snap up good companies at relatively low prices. Here are three UK shares that I would buy this week for my Stocks and Shares ISA.
UK pet boom
CVS Group (LSE: CVSG) operates veterinary practices, laboratories, crematoria, and an online retail business. This £1.25bn market capitalisation company has managed to grow its revenues and profits by 15% and 17%, respectively, on average in each of the last five years. That’s a fantastic track record.
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The UK’s pet population has almost certainly increased over the last couple of years, and CVS could see a prolonged growth in its revenues as a result.
In March 2020, the Competition and Markets Authority ruled that CVS’s purchase of a smaller vet chain reduced competition. CVS ended up selling the company and saw its share price tumble. The specifics of the ruling will make expansion in the UK small-animal vet field trickier to navigate. However, expansion into Europe and large-animal practice is underway, which should prove fruitful. The company also appears to be dealing fairly well with the industry-wide staff shortage.
A UK software share
Learning Technologies (LSE: LTG) provides in-person and online education and talent management services to corporations in the US (70% of business), Europe, and the UK.
A good chunk of this £810m market cap enterprise’s revenues come through multi-year software contracts. Many corporations must deliver training to satisfy regulations, which benefits Learning Technologies.
After making losses for much of the last decade, Learning Technologies swung to a profit in 2018 and has stayed in the black ever since, including during the pandemic. Annual revenue growth has averaged 56% over the last five years.
But I wonder why the company’s five-year average operating margin of 5% is so low, especially for a software-focused company. Also, the company raises funds from shareholders regularly, potentially diluting future returns, and increased its total long-term debt pile from £11m in 2020 to £188m in 2021.
Have cake and eat it
With a market cap of £110m, Finsbury Food (LSE: FIF) — which makes bread and cakes for retailers (mainly supermarkets) and food service companies, like coffee shops – is the smallest of my three UK shares.
Its revenue growth has been somewhat lacklustre at an average of 2.6% per year over the last five years. But it is impressive how management has managed to preserve operating margins through some tough times, with supply-chains creaking and inflation soaring. It appears to make the kind of treats that customers love, even if they are experiencing tough economic times.
There are plenty of growth opportunities to pursue via organic growth or acquisitions. Gluten-free bread is one new area that looks fruitful, and management has been talking up artisanal bread.
However, I do note that management seems keen on financing acquisitions through debt. The health of this company’s balance sheet is something I should monitor closely.
