This UK small-cap stock is up 40% in 2021. Should I buy?

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Clipper Logistics (LSE: CLG) is a UK small-cap stock that keeps rising. Since the beginning of the year, it has risen by nearly 40% and has increased by 90% during the past 12 months.

So can the stock still increase? Well, I think it can as e-commerce continues to grow. So despite the good run in 2021, I’d still buy the shares. In fact the company released its full-year results yesterday, and I think it’s worth me taking a closer look.

The numbers

The numbers were strong. Revenue increased by 39.1% from £500.7m to £696.2m. And profit after tax improved by 33.8% to £21.7m.

What I also like about the company is that its financial position has strengthened. The net debt position has reduced from £45.1m to £16.9m. It managed to raise the dividend as well and full-year income increased by 14.4% to 11.1p per share.

The fact that it has reduced it liabilities as well as improved the dividend emphasises its strong balance sheet and thereby its financial flexibility.

Other highlights

Clipper Logistics saw strong growth in the period. But it’s no surprise to me that this was fuelled by the pandemic, resulting in the structural shift to online shopping. What I think is also encouraging is how it has extend its existing contracts with key players such as ASOS and John Lewis.

It shows me that the company is clearly is doing something right in good times and bad in order for such clients to stay with the firm. Also, Clipper Logistics has managed to offer a scalable solution, especially as its customers have seen volume growth.

It has also started new operations with Mountain Warehouse and JD Sports. The company said that it has “been able to demonstrate the benefit for customers to outsource their supply chain by joining our shared user operations”.

An outsourced solution is a cost-effective one for many retailers. Otherwise it would be a case of putting the infrastructure and supply chain together, which can be expensive. Given Clipper’s high-profile customers, I reckon more retailers will join, thereby increasing its sales and profits.

Risks

The UK small-cap stock isn’t cheap though. It’s trading close to all-time highs and has a price-to-earnings (P/E) ratio of 39x. So from a valuation perspective, it’s expensive. This may put off some investors (but not me).

While the company has been growing, especially during the pandemic, there’s no guarantee this will continue in a post Covid-19 world. With the shares already high, any negative news could hit the stock price.

Should I buy?

It’s expensive but I reckon some shares are worth paying for. And I think Clipper Logistics is one of them. The company is in a great position to capitalise on the e-commerce boom, which should continue after the pandemic. Hence, I’d buy.

The post This UK small-cap stock is up 40% in 2021. Should I buy? appeared first on The Motley Fool UK.

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Nadia Yaqub has no position in any of the shares mentioned. The Motley Fool UK has recommended ASOS and Clipper Logistics. 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.