Although the stock market had a good run in 2021, I reckon there could be further gains for many shares in 2022. Below are three shares I would pick for my portfolio in 2022 because I like their growth prospects.
Tarnished brand but a solid business: Boohoo
To say that online retailer Boohoo (LSE: BOO) has had a hard time lately is putting it mildly. The shares’ prices sat 68% below where they were a year ago, at the time of writing this article earlier today.
Clearly there are risks here. The company’s supply chain has come under critical scrutiny, potentially reducing the brand’s appeal to its customers. Cost inflation, supply chain problems and unexpectedly high return rates led the company to issue a profit warning last month.
But I think the Boohoo share price may now be focussed on the risks while ignoring the opportunities. It trades at 15 times last year’s earnings. That seems cheap given its strong growth prospects. While this year’s earnings may be lower, I see continued opportunities for the firm to expand its business, which last year saw revenues increase 41%. I would consider buying it for my portfolio now.
Strong business growth outlook: S4 Capital
Another company whose shares have taken a tumble lately is digital ad agency holding group S4 Capital (LSE: SFOR). Its shares are down 39% from their September high.
The S4 Capital share price is now within 1% of where it stood a year ago. I regard that as a bargain given the strong growth in the company since then. Last week it reiterated its expectation of doubling revenues and profits organically within a three-year period. It will likely grow further by bolting on acquisitions, another one of which was announced last week.
The S4 share price tumbled after it warned of higher costs to integrate acquisitions. That risks diluting profit margins. But last week the company tackled investor concerns and said that it is targeting “an improvement in the operational EBITDA margin back towards previous levels“. S4 is working hard to restore shareholder enthusiasm. I see strong growth potential and tightened cost control as possible drivers to push the share price higher in 2022.
UK shares in recovery mode: Card Factory
Retailer Card Factory (LSE: CARD) may help its customers celebrate special moments but it has had limited cause for celebration itself lately. A trading statement last week hurt the shares, but the company actually upgraded its revenue expectations for the year. It expects sales to grow strongly, from over £360m last year to more than £600m within five years.
Profits before tax for last year are expected to be £7m-£10m. That compares to £65m before the pandemic. But it shows that the company is in recovery mode. With the expected sales growth, I think it can surpass pre-pandemic earnings in years to come.
Supply chain risks could hurt the company if increased shipping costs damage profit margins. The shares have risen 46% over the past 12 months. I think a return to profit and plans for strong revenue growth could propel the shares higher in the coming year. I would consider adding Card Factory to my portfolio.
Christopher Ruane owns shares in S4 Capital. The Motley Fool UK has recommended Card Factory and boohoo group. 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.
