These might not be the best times for many companies, what with the pandemic dragging on, but some are certainly going from strength to strength. One of them is the AIM-listed UK stock K3 Capital (LSE: K3C), which has shown an impressive increase in its financials over the years.
What does K3 capital do
The company provides advisory services to small and medium-sized enterprises under three heads. The first of these is mergers and acquisitions, which includes services like company sales and corporate finance services. The next is tax advisory, which includes all kinds of services related to taxation including tax credit claims and tax investigations-related works. And then there is its restructuring advisory, which provides insolvency and restructuring-related advice, analysis of business performance, and forensic accounting services.
Growth across segments for the UK stock
In its recent trading update, K3 Capital said that all business divisions have performed well in the six months ending 30 November 2021. It now expects that revenue for this half-year to have almost doubled from the year before. An increase in profits is also expected. As per CEO John Rigby, the board “is confident in the prospects of the Group for the remainder of FY22 and beyond”.
The company expects growth through both the organic route as well as through acquisitions. In fact, the past six months’ performance reflects two recent acquisitions that took place in July 2021. Clearly, the company is doing a whole lot right, considering that between 2018 and 2021, its revenues have increased by three times.
Downside to the AIM stock
Its share price has also risen by a healthy 46% in the past year. However, not all is hunky-dory. Its over the years, its share price has fluctuated a fair bit. And its price-to-earnings (P/E) ratio is also pretty steep at 46 times. I guess this is partly because it has performed quite well recently. Still, considering the uncertain times we are living in, I do think that this is a very high for a relatively small firm. It has a market capitalisation of £275m, which is certainly not among the smallest, but it is a far cry from big FTSE 100 companies. And this industry segment could suffer if the recovery continues to be muted because of the Omicron variant.
What I’d do now
Keeping this in mind, I will not buy the AIM stock right away. I will wait for the whole Covid-19 situation to play out over the next month or so. This will give me a better assessment of how things might look for it in 2022. If they do continue looking bright, I would very much like to invest £1,000 in the stock next year. If they falter, however, I will keep it on my investing watchlist, and buy the UK stock when the time looks right. In the meantime, I will focus on more predictable stocks.
Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.
