I am on the lookout for the best UK shares for my portfolio. One stock I am currently considering is Marshalls (LSE:MSLH). Should I buy or avoid the shares for my portfolio? Let’s take a look.
Construction and building supplier
Marshalls is one of the UK’s leading landscaping product manufacturers. It manufactures and supplies a multitude of products such as natural stone and concrete for the construction, home improvement, and landscape markets. It has roots stretching back to 1890s.
Marshalls sells its products via three main channels. These are to builders merchants and private builders, large construction firms, and direct to consumers.
As I write, shares in Marshalls are trading for 722p, which is similar to this time a year ago when shares were trading for 721p. In the three months, shares have dropped from 845p to current levels. Is now a good opportunity for me to buy cheap shares in an established company?
Positive performance and outlook
Marshalls’ most recent trading update was a half-year report announced in August, which made for excellent reading. It reported that revenue has surpassed 2020 and pre-pandemic 2019 half-year levels, as did gross profit, which shows strong recovery since the pandemic affected it. Debt levels had decreased from 2020 and pre-pandemic levels, which was due to excellent trading and favourable market conditions. An interim dividend of 4.7p per share was declared. This was the same amount as in 2019. There was no interim dividend in 2020. Many UK shares cancelled dividends in 2020 to conserve cash.
Marshalls has a good track record of performance too. I do understand past performance is not a guarantee of the future but I use it as a gauge nevertheless. Prior to the pandemic-affected 2020 results, revenue and profit grew year on year for three years in a row. I expect the next full-year results to surpass 2019 levels if this half-year report is anything to go by.
The outlook ahead is positive for Marshalls in my opinion. The construction sector is booming right now and the UK government has committed to spending £100bn on projects over the next few years. This could boost Marshalls and it is also taking its own steps to grow further. It has decided to spend £21m in 2021 as capital investment to aid growth plans. This includes a new manufacturing plant in St Ives.
UK shares have risks
Despite my bullish stance, I must note credible risks of investing in Marshalls. It is well known that macroeconomic issues affect the construction industry most of the time. Current supply chain issues as well as rising inflation and costs could affect operations, performance, and the bottom line. This could affect investor returns. Furthermore, the pandemic is not over and any new variants could derail performance, like it did in 2020 at the beginning of the pandemic. Other similar UK shares could be affected by similar issues.
I would buy Marshalls shares. At current levels, I think the shares are a tad expensive with a price-to-earnings ratio of close to 30, so if shares were to cheapen I would be even happier to add them to my portfolio. I’m confident the construction boom will benefit Marshalls, and it has a good position in its market to continue growing, performing well, and providing investor returns.