Clipper Logistics shares are up 35% in 2021. Should I buy?

I identified Clipper Logistics (LSE: CLG) shares as one of my top UK small-cap picks for 2021 in December. And I’m pleased to report that the stock hasn’t disappointed me. The share price is up over 35% in 2021 so far and has increased more than 160% during the last 12 months.

Of course, past performance isn’t an indication of future returns, but I reckon this rally could continue. Hence I’d still buy Clipper Logistics shares even at this level. The company released a year-end trading update yesterday, which was positive. I think it’s worth taking a closer look.

Strong numbers

Clipper Logistics reported some strong numbers. The company performed well throughout its 2021 financial year. It expects full-year revenue of £698m, which is an impressive 39% increase compared to the prior year.

It also said that “full-year EBIT (IAS17 basis) is expected to be in line with expectations of £31.6m, an underlying increase of 53% on the £20.6m achieved in FY20, excluding the negative goodwill which arose in FY20”.

Let me first start by saying that these rises are huge. Clearly, the company has emerged from the pandemic as a winner. The structural shift to online shopping was accelerated during the coronavirus crisis. And I think the firm will continue to see momentum in e-fulfilment after Covid-19.

It’s also worth highlighting that the strong performance has been driven by a combination of organic growth and new contract wins. To me, this shows that the company has an impressive track record of supporting and providing solutions to online retailers.

It has even upgraded its guidance for 2022 and 2023. The company is clearly optimistic about the future and I feel Clipper Logistics shares could rise further.

Acquisition

The firm also reported that it has acquired Wippet. This is to support and extend its own reach into the Life Sciences sector. This has been identified as a “potential significant growth opportunity”.

Wippet will launch an online business-to-business (B2B) platform in September, “initially targeting buyers from the fragmented elderly care market, which is a sector worth up to £2.5bn per annum, alongside vendors who sell to more than 5,500 care homes across the UK”.

I think it’s great to see Clipper Logistics diversifying its sector exposure and revenue. It will now own a platform, which in time has the potential to expand internationally.

Contract extension

As I previously mentioned, Clipper Logistics is clearly doing something right. It has renewed its contract with ASOS in Europe with a three-year extension. 

The logistics company already provides returns management services for ASOS’s mainland Europe operation. This will continue under the extended contract. Not only is it winning new clients but it’s also maintaining existing ones.

Risks

Clipper Logistics shares do come with risk. The stock is expensive with a price-to-earnings (P/E) of 49x. 

In fact, the shares are trading close to an all-time high. So investors need to be aware that the stock could be very sensitive to any negative news. This even includes any slight slowdown in growth.

But, I reckon Clipper Logistics shares could rise further. The company is well positioned to continue to capitalise the online shopping trend. Hence I’d buy the stock.