After recent turbulence in the stock market, some UK growth shares have fallen sharply. I see some buying opportunities for my portfolio. If I had a spare £300 at the moment, I would use it to buy more shares in two beaten down growth companies I already own.
S4 Capital
Last year, digital media agency holding group S4 Capital (LSE: SFOR) saw its share price soar 27%. In 2022, though, things have got off to a bad start. S4 shares have fallen 18%, meaning that over the past 12 months they only show a 5% gain.
I see that as a buying opportunity for my portfolio. S4 is a larger business than it was a year ago and I think its growth prospects are also more attractive. It plans to grow revenues and gross profits organically by 100% in just three years. On top of that, the highly acquisitive company will likely see bolt-on growth. It has been adding big clients as well as expanding its service offering.
UK growth shares I would buy now
Full-year results from S4 are due next month and they should give indications about how the business is doing. Fast growth has seen headcount balloon to over 8,000. The costs of managing such a large team could eat into profit margins. S4’s large exposure to tech clients such as Google parent Alphabet could mean revenues are hurt if the sector tightens its belt when it comes to spending.
But the rapid growth points to the fact that the S4 model clearly appeals to clients. It has a global team of top talent and is growing its lead on competitors when it comes to developing digital marketing offerings. I expect strong growth to lead the share price upwards again. I would gladly spend £150 on S4 Capital shares for my portfolio.
Renalytix
Kidney diagnostics specialist Renalytix (LSE: RENX) has had a very bumpy year, with its share price tumbling 59% in 12 months.
Some of that fall reflects risks I think could indeed be significant. The company’s revenue is small and there is no guarantee it will ever reach critical mass. The company is hoping to grow revenues by recruiting a big sales force. But that is costly and will eat into profits.
Despite the risks, I think there is a very interesting investment case at Renalytix. The market for kidney diagnosis is large and set to grow in future. Renalytix’s platform is already proving its worth to doctors, with a growing number of scientific studies to support it. The digital nature means it is scalable. So, while currently Renalytix is spending on large upfront costs like sales teams, over time hopefully the more installations Renalytix can achieve the better its profit margin will become. With a large, growing market size, a unique product, and a strategy to sell to large healthcare providers in the US, I think Renalytix could turn out to be a highly profitable business in future.
As the share price falls indicate, many investors continue to question the long-term prospects for Renalytix and how much money it will need to spend to build a profitable business at scale. But I continue to think the outlook is positive. I would happily spend £150 on Renalytix shares for my portfolio.
Christopher Ruane owns shares in Renalytix and S4 Capital. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares) and Alphabet (C shares). 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.
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