Looking at recent news from Keystone Law, I think the decline in the share price is a little excessive. So, I plan to buy more of the stock in the near future. Here’s why I’m bullish.

Keystone Law just raised its dividend by 16%

Keystone’s recent half-year results, for the six months to the end of July, were pretty solid, in my view.

Revenue was up 9.3% year on year to £36.8m. Meanwhile, adjusted basic earnings per share were basically flat on the same period last year (11.8p versus 11.9p last year). I think that’s a good result given that a) costs have soared this year, and b) last year’s profits were boosted by a lack of networking events.

It gets better though. For the period, Keystone Law declared an interim dividend of 5.2p per share. That represents a 16% increase on the dividend paid a year earlier. This suggests to me that management remains very confident about the future.

The company also said that client demand has remained strong, and that it expects full-year results to be comfortably in line with market expectations.

Overall, the H1 results were encouraging.

Insiders have been loading up on this UK stock

The recent results aren’t the only reason I’m bullish on Keystone Law, however. What’s really grabbed my attention is the fact that insiders have been snapping up shares.

Regulatory filings show that on 27 September, Keystone’s founder and CEO James Knight bought 111,110 shares in the company at a price of 450p per share. This trade cost the insider around £500k.

On the same day, non-executive director Simon Philips also bought 20,000 shares at a price of 457p. This trade cost him approximately £91k.

I think this director dealing activity is very interesting. As both founder and CEO, Knight is likely to have an excellent understanding of the company and its prospects. Philips is also likely to have a good understanding of the stock’s potential as he’s the CEO of private equity firm ScaleUp Capital.

Attractive valuation and yield

After the recent share price fall, Keystone Law shares now have a very reasonable valuation. At present, the forward-looking P/E ratio here is around 20. Given that the company has grown its sales by around 170% over the last five years, I see that valuation as attractive.

I also like the yield on offer. Keystone is projected to pay out 15.9p per share in dividends this year, which equates to a yield of around 3.5% at the current share price.

I’m going to buy more shares

Of course, there are risks to consider. If economic conditions here in the UK continue to deteriorate, Keystone’s revenues and profits could fall. That’s because there’s a positive correlation between economic activity and demand for lawyers.

However, with the stock down massively in 2022, I would have thought a lot of this risk is already priced in.

Accordingly, I’m going to be buying more shares for my portfolio in the near future.

Personally, as a long-term investor who likes to buy growth shares at a reasonable price, I’m not complaining. Right now, I’m seeing plenty of buying opportunities. With that in mind, here’s a look at two beaten-up growth shares I’d buy today.

A fast-growing, disruptive UK company

The first stock I want to highlight is Keystone Law (LSE: KEYS), a small-cap company that’s listed on the UK’s Alternative Investment Market (AIM). It’s an innovative legal firm that operates a platform model where lawyers can work remotely.

Keystone Law’s share price has taken a massive hit this year and I don’t think the fall is justified. This company has grown at an impressive pace over the last few years (five-year revenue growth of 162%). Meanwhile, in mid-January, the group said the business was performing well. It noted that adjusted profit before tax for the year ending 31 January 2022 would be “materially ahead” of expectations.

Of course, one major risk here is the possibility of a UK recession. An economic downturn would most likely impact demand for legal services. However, I’d expect Keystone to weather the storm. It’s a highly profitable company with a strong balance sheet. And it’s continuing to add lawyers to its platform at a healthy rate.

After its recent share price fall, Keystone now sports an attractive valuation in my view. With analysts expecting earnings of 21.8p for 2022, the forward-looking P/E ratio is under 30.

It seems investors are catching on to the value on offer here. Since 23 March, Keystone’s share price has been moving upwards. I think there’s plenty more upside on the cards.

Down 70% in a year

The second beaten-up growth stock I want to discuss is online fashion retailer ASOS (LSE: ASC). This year, its share price has fallen 33%. Meanwhile, over the last year, it’s down about 70%.

ASOS does face some challenges right now. Like most retailers, it is experiencing supply chain and cost issues. Meanwhile, it has suspended operations in Russia, which accounts for about 4% of sales.

I still like the long-term growth story here though. Over the next five years, the online fashion industry is projected to grow by around 7% per year. This should provide tailwinds for the company.

After the recent pullback, ASOS shares look very cheap. For the year ending 31 August 2023, analysts expect the group to post sales and earnings of £4.9bn and 14.6p respectively. That puts the stock on a price-to-earnings ratio of 15 and a price-to-sales ratio 0.41. I see a lot of value at those multiples.

In terms of risks, supply chain issues could last a while. I think they could last all year and persist into 2023. So patience is needed here. I’ll be taking a long-term view.

It’s worth noting that ASOS shares recently moved from the AIM market to the main market. This could help the group attract more attention from institutional investors when business conditions improve.

Here, I’m going to highlight five top AIM stocks I’d buy for 2022 and beyond. All five of these companies are already profitable (which reduces risk significantly), have good track records in terms of growth, and look set to benefit from powerful structural trends in the years ahead.

Software stock with momentum

One of my top AIM picks is Cerillion (LSE: CER). It’s a software company that provides billing, charging, and customer relationship management solutions for businesses.

There are a number of reasons I’m bullish here. For starters, the company has a lot of momentum right now. In its full-year results for the year ended 30 September 2021, revenue was up 25% to £26.1m while adjusted earnings per share (EPS) were up 105% to 25.5p. During the year, the group won a number of major new contracts.

Secondly, management appears to be very confident about the future. “Prospects for ongoing growth remain very strong. With a record back-order book and strong new business pipeline, we remain confident of continued momentum over the new financial year,” said CEO Louis Hall in the company’s full-year results.

Third, the company’s financials look very solid. Debt is low while return on capital employed (ROCE) – a key measure of profitability – is trending up.

Finally, the valuation seems very reasonable. At the current share price, the forward-looking price-to-earnings (P/E) ratio is about 30, which is not high for a software company.

Of course, there are risks to consider here. One is that, at this stage, recurring revenues are still relatively low (33% last financial year). So, the company will need to keep landing new contracts to generate top-line growth.

Overall, however, I think the risk/reward proposition here is very attractive for me.

Poised to benefit from economy recovery

My next pick for 2022 is Keystone Law (LSE: KEYS). It’s an innovative UK legal firm that operates a ‘platform’ model in which lawyers can work remotely.

There are two main reasons I like this AIM stock. The first is that the company looks well placed to benefit from the ongoing UK economy recovery. Higher levels of economic activity typically lead to higher demand for legal services.

The second is that as a platform business, the long-term growth potential here is significant. Unlike traditional legal firms, the firm is not constrained by office space. I expect its work-from-anywhere business model to be very appealing to lawyers across the country post-Covid.

A risk though is the valuation. Currently, Keystone Law sports a forward-looking P/E ratio of just under 40. This means the stock is priced for perfection.

This is a high-quality company, however. Over the last five years, revenue has climbed 163% while ROCE has averaged 26%. So, I think I can justify the higher valuation here.

A founder-led company

Another stock that could potentially benefit from the economic recovery is Alpha FX (LSE: AFX). It’s a leading provider of foreign exchange (FX) hedging services. It also offers payment solutions for businesses.

Alpha FX has a lot of momentum right now as well. In a December trading update, the company told investors that trading had remained “strong”. Additionally, it advised that revenue and earnings for 2021 would be ahead of expectations.

One thing I like about AFX is that the company is ‘founder led’. Research has shown that such companies often turn out to be good long-term investments.

I also like the growth here. Between 2015 and 2020, revenue climbed from £5.1m to £46m. For 2021, analysts expect revenue of £72m.

On the downside, this AIM stock is another one that’s expensive. Currently, the forward-looking P/E ratio is near 40. If growth slows, the share price could take a hit. I’m comfortable with this risk, however.

An stock for the 5G revolution

My fourth AIM pick for 2022 is Calnex Solutions (LSE: CLX). It’s a leading provider of testing and measurement services to the telecommunications industry.

The reason I’m bullish on CLX is pretty simple. Right now, the telecommunications industry is undergoing massive transformation as the fifth generation of network technology (5G) is being rolled out. 5G is ultimately the key to all the exciting new technologies we keep hearing about such as self-driving cars and remote surgery. This rollout of new telecommunications technology is likely to create a high demand for network testing services in the years ahead.

In November, Calnex posted a solid set of H1 results for the period to 30 September 2021. The company advised that it had experienced “strong levels of trading” in the first half of its financial year and that it was expecting this trend to continue in the second half. “We continue to capitalise on the global telecom industry’s transition to 5G and the growth of cloud computing,” commented CEO Tommy Cook.

A risk to consider here is the ongoing semiconductor shortage. This could potentially cause disruption. I think this is probably priced into the stock, however. Currently, the forward-looking P/E ratio is just 25, which is quite low relative to the company’s growth.

Growth at a reasonable price

Finally, I like Gamma Communications (LSE: GAMA). It’s a leading provider of business communications solutions.

One reason I’m bullish on Gamma is that the industry it operates in, ‘unified communications’, looks set for strong growth in the years ahead. According to Grand View Research, the industry is set to grow by around 21% per year between now and 2028. This growth should provide huge tailwinds for Gamma, which has grown its top line by over 100% in the last five years.

Another reason I like this AIM stock is that its share price has had a big pullback over the last few months. Back in September, the stock was trading above 2,300p. Today, however, it’s trading near 1,620p. I see this pullback as an opportunity. Currently, the forward-looking P/E ratio is just 23.

But of course, growth could slow in the near term. That’s because many businesses have pulled forward their communications spending during Covid. For long-term investors like myself, however, I think the risk/reward skew here is attractive.

A top share to buy right now

The first stock I want to highlight is Keystone Law (LSE: KEYS). It’s an innovative ‘platform-based’ law firm that allows lawyers to work remotely. Its clients include Virgin Atlantic, RBS, and the BBC.

There are two reasons I see Keystone Law as a great stock to buy right now. Firstly, the economic recovery is creating a high demand for legal services. “The legal market remains very busy,” the company noted last week. I expect demand to stay elevated as the UK economy picks up speed post Covid-19 and people go back to work.

Secondly, its business model has become more attractive for lawyers after the pandemic. Many have experienced the benefits of homeworking over the last 18 months, and there’ll be plenty who wish to keep working this way due to the work/life balance it offers. This should help Keystone grow its business in the years ahead.

Keystone Law posted an excellent set of results for the six-month period ended 31 July last week. For the period, revenue was up 38% year-on-year to £33.7m, while adjusted earnings per share were up 105% to 11.9p.

The company advised that activity remains “buoyant” and that it was confident its performance for the year would be “materially ahead” of market expectations. These results show Keystone has a lot of momentum at present.

One risk to consider here is the stock’s valuation. The forward-looking P/E ratio using analysts’ current earnings forecast is about 47. That’s high. It doesn’t leave a huge margin of safety.

However, I’m comfortable with the valuation risk. I think this stock could easily double or triple in the years ahead as the group increases the number of lawyers on its platform.

Growth at a reasonable price

Another UK stock I believe has significant growth potential is Computacenter (LSE: CCC). It provides technology solutions (cloud computing, networking, cybersecurity, remote work software, etc) to businesses and government organisations globally.

The reason I see Computacenter as one of the best shares to buy now is pretty simple. The pandemic has shown that organisations need to be fully digital. However, the reality is that many still aren’t. This leads me to believe that demand for CCC’s services is likely to remain high in the years ahead as organisations undergo digital transformation.

Computacenter’s H1 2021 results showed strong growth. For the period, revenue was up 29% to £3.2bn. Meanwhile, adjusted diluted earnings per share jumped 56.5% to 73.1p. On the back of this growth, the H1 dividend was hiked by a huge 37% to 16.9p per share. The company also noted it’s on track to achieve its 17th year of uninterrupted earnings per share growth.

A risk to consider is supply-chain issues. Like many other tech companies, CCC is being impacted by the global semiconductor shortage. This could hit near-term growth.

Overall however, I think the stock offers a very favourable risk/reward proposition right now. After a recent share price pullback, the stock trades on a P/E ratio of 19.6, which I think is a steal.

Rupert Hargreaves: Braemar Shipping Services 

Braemar Shipping Services (LSE: BMS) is an international shipbroker and shipping services provider. Its exposure to seaborne trade suggests the company is highly leveraged to the global economic recovery. Indeed, analysts reckon group earnings per share will increase 40% this fiscal year. 

Based on these projections, the stock looks cheap trading at a forward price-to-earnings (P/E) multiple of 12.8. 

The company’s valuation and growth potential are the reasons why I’d buy Braemar as a recovery stock in July. 

That said, if the economic recovery fails to live up to expectations, Braemar may be one of the first to suffer. As such, this investment has quite a high level of risk. 

Rupert Hargreaves does not own shares in Braemar Shipping Services.

Edward Sheldon: Keystone Law

My top small-cap stock is Keystone Law (LSE: KEYS). It’s an innovative, platform-based law firm that’s disrupting the UK legal industry. Last year, it won ‘Law Firm of the Year’ at The Lawyer Awards.  

Keystone has generated strong revenue and profit growth in recent years and I expect it to continue doing so in the years ahead. In the short term, the company should benefit as the UK reopens and economic activity picks up. In the long run, the expansion of its platform should drive top- and bottom-line growth higher.

One thing to be aware of is that the stock’s valuation is quite high. This adds risk to the investment case. Overall, however, I think the risk/reward proposition here is attractive.

Edward Sheldon owns shares in Keystone Law

Harshil Patel: Cake Box Holdings 

Cake Box Holdings (LSE:CBOX) is a specialist retailer of fresh cream cakes. It’s a franchise business and delivers most of its growth by opening new stores.  

So it’s encouraging to see a strong pipeline of new locations. It currently has 157 franchised stores and another 18-24 are expected this year. It’s also trialing several kiosks with a national supermarket. 

At some point, locations could become saturated and an optimum number of stores will be reached. That said, there’s currently plenty of eligible franchise applicants and potential locations to keep Cake Box growing.  

Overall, Cake Box is a quality company led by entrepreneurial management. I like that it offers double-digit earnings growth and strong margins. Its balance sheet looks strong and even offers a well-covered dividend. 

Harshil Patel owns shares in Cake Box Holdings.

Tom Rodgers: SCS

With home refurbishment markets booming, sofa manufacturer SCS Group (LSE:SCS) is my top small-cap stock for July 2021. The £116m market cap firm has produced operating profit growth of 30.6% in the last 12 months as sales and profits surge post-lockdown. Dividends are expected to return in force, as high as 12p per share for 2022, offering substantial future income even after a 40% rise in the share price in the year to date. A forward P/E of 11 times earnings is cheap and I see more upside for July and beyond.

Tom has no position in SCS at time of writing.

G A Chester: B.P. Marsh & Partners 

Founded in 1990, and still founder-led, B.P. Marsh & Partners (LSE: BPM) is a specialist private equity investor in early stage financial services businesses. There’s higher risk with fledgling businesses, but the company has an impressive long-term record of growing its net asset value (NAV). It reported another year of growth last month, with NAV up £13m to £150m. 

The stock is currently priced with a market capitalisation around £120m. In other words, at a 20% discount to NAV. Given the company’s track record of delivering strong shareholder returns (including dividends), and the growth prospects of its investee businesses, I think there’s exceptional value on offer here. 

G A Chester has no position in B.P. Marsh & Partners.

Zaven Boyrazian: Bioventix 

Bioventix (LSE:BVXP) is a biotech company that manufactures specialised antibodies for blood testing. It’s a niche product. But remains an essential ingredient for diagnosing almost every type of disease – including Covid-19.

The firm generates revenue from direct sales to in-vitro diagnostic companies and royalties from any product developed using its propriety material. The latter has yet to evolve into a substantial source of income. But it does provide the facility for a recurring revenue stream in the future.

Bioventix operates in a highly regulated industry. This undoubtedly adds some operational risks. Suppose the firm or any of its royalty-generating customers fail to comply with regulations. In that case, its reputation and income could be compromised. But personally, I think the potential reward is worth the risk.

Zaven Boyrazian does not own shares in Bioventix.

Roland Head: Vertu Motors

Car dealership group Vertu Motors (LSE: VTU) is one of the UK’s largest motor retailers, with brands including Bristol Street Motors. Vertu says that demand for used cars is “exceptional” at the moment. The latest update from the company revealed strong trading and triggered an upgrade to profit forecasts.

The main risk flagged by the company is that the global chip shortage will cause delays to new car deliveries. However, Vertu’s share price is covered by the value of the group’s property portfolio, and the business currently trades on just seven times forecast earnings. Brokers are also forecasting a useful 3.6% dividend yield this year.

In my view, Vertu looks like a good, cheap, small-cap stock. I recently added the shares to my portfolio.

Roland Head owns shares of Vertu Motors.

Paul Summers: SDI Group

Having multi-bagged over the last year, shares in shares in scientific product maker SDI Group (LSE: SCI) look expensive. However, I suspect they could eventually be worth a lot more thanks to an acquisition-focused growth strategy similar to that of FTSE 100 top stock Halma.

There could even be more upside in July. The company stated in May that it would exceed previous estimates on FY21 revenue and adjusted pre-tax profit (given in February). I wonder if trading since then, combined with the lifting of restrictions, will lead management to also upgrade its FY22 guidance later this month.

Paul Summers has no position in SDI Group or Halma.

Christopher Ruane: M&C Saatchi

Things have been looking up for the previously troubled advertising small-cap stock M&C Saatchi (LSE: SAA).

The shares are up 156% already over the past year. For a company whose survival was in question at one point, that is impressive. But I see further possible gains ahead. The advertising market generally is buoyant. M&C Saatchi is poised to benefit from that. The company recently lifted its forecast for the year.

The company’s reputation remains tarnished, though, which could act as a dampener on growth.

Christopher Ruane does not own shares in M&C Saatchi.

Royston Wild: Begbies Traynor 

The British government’s furlough schemes have helped keep a lid on insolvency rates during the pandemic. But with these financial support programmes set to end, I think now could be a good time to invest in Begbies Traynor Group (LSE: BEG). 

Indeed, buying this UK share before full-year results are released on Tuesday 20 July could be a very good idea. Despite a depressed insolvency market Begbies Traynor said in May that full-year revenues would grow ahead of market expectations following a strong fourth-quarter performance. News that trading has remained robust in the new financial period (to April 2022) could help lift the small cap again following recent share price weakness.

At current prices Begbies Traynor trades on a rock-bottom forward price-to-earnings (PEG) ratio of 0.4. This provides plenty of scope for a fresh move higher.

Royston Wild does not own shares in Begbies Traynor. 

For investors, this economic growth could create a lot of lucrative opportunities. With that in mind, here’s a look at two UK shares I’d buy to benefit from a booming UK economy.

A disruptive company

One stock that could perform well as the UK economy recovers from Covid-19 is Keystone Law (LSE: KEYS). It’s an innovative platform-based law firm that’s disrupting the legal industry. Last year, it won ‘Law Firm of the Year’ at The Lawyer awards.

Demand for legal services is likely to rise as the UK economy picks up speed in the months ahead. In some areas of law, such as construction, employment and real estate, demand could rise significantly. This should benefit Keystone, pushing its revenues and profits higher.

In Keystone’s recent 2020 results, the company said that 2021 had “started well” with “good levels of activity.” It also announced a big increase in its dividend. This suggests to me the company is confident about the future. For the current financial year (ending 31 January 2022), City analysts expect revenue growth of around 14%.

It’s worth pointing out that Keystone is a small company. Currently, its market-cap is just £210m. Stocks of this size can be volatile. Another risk to consider is the valuation. Keystone’s forward-looking price-to-earnings (P/E) ratio of 40 doesn’t leave a huge margin of safety.

Overall however, I think the growth story here is attractive. I expect this company to do well as UK economic activity picks up.

This stock is flying 

Another UK stock I think could do well as the UK economy rebounds is K3 Capital (LSE: K3). It’s an under-the-radar business that provides advisory services to small- and medium-sized enterprises (SMEs). I expect demand for its services (which include company sales, off-market acquisitions, restructuring, tax planning etc) to be strong in the year ahead.

K3 appears to have a lot of momentum at present. In early March, the group said that following a strong start to the second half of its financial year, the group was trading ahead of expectations. In April, the group also advised this trend had continued, and said it expects results for the year ending 31 May to be “significantly ahead” of revised consensus market expectations. It now expects revenue for the year to be around £45m – much higher than the figure of £15m posted last year.

A key risk here is that the stock can be volatile at times. Early last year, for example, its share price halved. Sales can also be lumpy which isn’t ideal from an investment point of view.

Overall however, I think this stock has a lot of potential in the current environment. At the current valuation (forward-looking P/E ratio of 23) I think it’s priced to buy.

Encouragingly, some experts believe these conditions could last for a while. Wharton professor Jeremy Siegel, for example, expects stocks to keep rallying at least through this year. Although not everyone is this bullish, of course.

Here, I’m going to highlight two stocks that I believe can move higher in this bull market. I’d be happy to buy both for my own portfolio today.

Consumers are cashed up

One growth stock I believe has the potential to do well in this bull market is JD Sports Fashion (LSE: JD). It’s a retailer that specialises in athletic footwear and athleisure wear. It currently trades on a forward-looking price-to-earnings (P/E) ratio of 24, which I see as an undemanding valuation.

One reason I’m bullish on JD is that the company now generates around 35% of its sales from the US. With many US consumers now cashed up after receiving their stimulus cheques, I can see JD benefitting as the US reopens and people rush out to buy new footwear.

It’s worth noting that JD Sports is investment bank Berenberg’s ‘top pick’ in the consumer discretionary sector. It believes the company is well-positioned for a strong and fast recovery given its regional mix and the growing evidence of accelerating consumer demand for trainers.

“JD looks cheap, in our view, for its quality and growth, offering a faster-growing and more diversified alternative to owning the sports brands, at a 40% discount,” its analysts wrote last week.

This stock can be volatile at times. So, it isn’t likely to be suitable for all investors. The company also faces plenty of competition from rivals, which adds risk to the investment case. However, I’m comfortable with these risks. I’d buy the stock today.

This stock should benefit from a stronger UK economy

In the small-cap space, one stock I believe could do well in this bull market is Keystone Law (LSE: KEYS). It’s an innovative ‘platform-based’ law firm that’s disrupting the legal industry. I listed this stock as one of my best ‘buy’ ideas for 2021 and, so far, it’s done pretty well, rising from 500p to 625p – a gain of 25% (versus 4% for the FTSE All-Share). However, in the years ahead I think this stock can climb much higher.

The reason I’m bullish here is that I expect demand for legal services in the UK to pick up dramatically this year as the economy rebounds. This should benefit Keystone. We haven’t had a trading update from the company for a while now. However, in its last update in January, the company said trading during December and January has been “exceptionally strong.” This is encouraging.

Given its small market capitalisation (£200m), this stock could be volatile. This adds risk to the investment case. The stock’s valuation (forward-looking P/E ratio of just under 40) also adds risk. If the company’s full-year results on 29 April are disappointing, the stock will most likely fall.

But think the long-term growth story here is very attractive. I’d buy this growth stock today for the current bull market and hold it for the long term.

Fundsmith portfolio manager Terry Smith appears to share my view. In his recent letter to investors, he wrote that the concept might “help to explain what may happen.”

Here, I’m going to discuss two UK stocks I’d buy for a K-shaped recovery. In my view, both are well placed for the ‘new normal’.

An online retailer for a K-shaped recovery

One UK stock that strikes me as a good way to play a K-shaped economic recovery is online fashion retailer Boohoo (LSE:BOO). While high street retailers have struggled over the last year, its sales have exploded. For the four months ended 31 December, for example, revenue was up 40%.

Boohoo has a number of things going for it at present. Firstly, it’s benefitting from the shift to online shopping. Between now and 2025, online fashion sales are expected to boom.

Secondly, it’s benefitting from a number of lifestyle trends. The increased focus on health and wellness is boosting demand for athleisure wear. Meanwhile, the increase in the number of people working from home is boosting demand for loungewear.

Boohoo has made a number of acquisitions recently that could boost growth significantly. Last month, it acquired the Debenhams brand. This month, it has picked up the Dorothy Perkins, Burton, and Wallis brands. The company believes these brands strengthen its position as a leader in the global fashion and beauty e-commerce markets.

There are some risks to be aware of here. One is integration risk. There is no guarantee the recent acquisitions will be successful. Another is a potential UK tax on online retailers. There’s also some valuation risk, as the forward-looking P/E of 35 doesn’t leave a huge margin of safety.

Overall however, I see a lot of appeal in Boohoo shares. I see it as a good play for a K-shaped recovery.

A UK disruptor

Another UK stock that I believe could do well in a K-shaped recovery is Keystone Law (LSE: KEYS). It’s an innovative platform-based legal firm that allows its lawyers to work remotely and is therefore very scalable. Last year, it was named ‘Law Firm of the Year’ at the Lawyer Awards.

Keystone posted a very encouraging trading update last month in which it advised that trading throughout December and early January had been “exceptionally strong”. As a result of this performance, the group advised that adjusted profit before tax for the period would be “materially ahead” of market expectations.

Looking ahead, Keystone is expected to keep growing. City analysts expect the company to generate revenue and net profit growth of about 10.4% and 9.8% respectively this financial year.

KEYS shares currently trade on a forward-looking P/E ratio of about 40. This means there is certainly some valuation risk here. If future performance is poor, the shares are likely to fall. It’s also worth noting that this is a small-cap company with a market cap of less than £200m. Stocks of this size can be highly volatile.

All things considered, however, I think this growth stock looks attractive. I see it as a good one to own in my portfolio for a K-shaped recovery.

Here, I’m going to highlight what I see as one of my best UK stock ideas for 2021 and beyond. I think this company has the potential to deliver big gains for investors like me in the long run.

A top UK stock I’d buy for 2021

Keystone Law (LSE: KEYS) is an innovative ‘platform-based’ challenger law firm that is disrupting the legal industry. The key difference between Keystone and other more traditional legal firms is that it enables lawyers to work from home or their own offices. This means that the company is extremely scalable.

Currently, Keystone has over 350 lawyers on its platform. However, the group believes that its addressable market is nearly 50,000 lawyers, which means there’s enormous growth potential here. And in a post-Covid world – where many lawyers have had a taste of working from home – I think the company should have no problems at all recruiting highly-skilled professionals to its platform.

Strong growth track record

Keystone’s growth track record is impressive. Between FY2016 and FY2020, revenue rose from £21m to £50m – a compound annual growth rate (CAGR) of 24%.

Meanwhile, last year, performance held up well. Often during recessions, legal firms can struggle. This is because demand for some legal services, such as those associated with transactions, can decline. However, for the year ending 31 January 2021, revenue is expected to increase about 5%. And in December, the group said that it expects to deliver profits for the year comfortably ahead of current market expectations.

If the company can deliver this kind of performance during the worst UK economic conditions in 300 years, imagine what it could do when the economy picks up. It’s worth pointing out that for the year ending 31 January 2022, analysts expect revenue growth of 15% and net profit growth of 19%.

Why I’d buy this British growth stock

Aside from its growth potential, there are a number of other things I like about Keystone Law.

First, the company appears to have a competitive advantage over its rivals. Recently, it was named ‘Law Firm of the Year’ at the prestigious Lawyer Awards 2020.

Second, the business is extremely profitable and has no debt. Over the last three years, return on capital employed (ROCE) has averaged 26%. Highly-profitable companies with strong balance sheets that are growing at a fast pace often turn out to be excellent long-term investments.

Third, founder and CEO James Knight owns over 30% of the shares. This means that management’s interests are aligned with those of shareholders.

And finally, City analysts are currently upgrading their earnings forecasts for the company. This should support the share price.

Risks

Of course, there are risks to be aware of here. Keystone Law is a small-cap company with a market cap of just £160m. This means that its share price could be volatile.

And the valuation doesn’t leave a huge margin of safety. Currently, the forward-looking P/E ratio is about 33. If the group’s near-term financial performance is disappointing, the shares could fall.

Overall, however, I think this UK stock offers an attractive risk/reward proposition. I hold this stock and in my view, Keystone Law has the right ingredients to be a winning investment.

Here, I’m going to highlight three ‘monster’ growth stocks I’d buy for 2021 and beyond. In my view, these stocks have the potential to generate big gains for investors in the long run.

Huge social media presence

One growth stock I believe has a lot of potential in 2021 and beyond is online fashion retailer Boohoo (LSE: BOO). It’s the owner of a number of hot brands including Boohoo, PrettyLittleThing, and Nasty Gal.

There are a few reasons I’m bullish on Boohoo. Firstly, it’s benefitting from the shift to online shopping. Secondly, going forward, working from home is going to remain a theme. This is going to keep demand for ‘loungewear’ elevated. Third, its brands are immensely popular with millennials, thanks to its huge social media presence.

Boohoo’s top line is expected to grow 34% this year and 25% next year. This means it’s growing at an incredible pace. Yet, right now, the stock is trading on a forward-looking P/E ratio of under 30 due to the supply chain issues the company’s facing (and has has vowed to fix). I see that valuation as a steal. I think Boohoo shares have considerable upside from here.

A disruptive growth stock

Another UK growth stock I think has massive potential is Keystone Law (LSE: KEYS). It’s an innovative ‘platform-based’ law firm that’s disrupting the legal industry by enabling lawyers to work from home or their own offices.

The firm – which was recently named ‘Law Firm of the Year’ – currently has over 350 lawyers on its platform yet believes its addressable market is nearly 50,000 lawyers. Founder and CEO James Knight owns around 34% of the shares, meaning management’s interests are aligned with those of shareholders.

Keystone’s growth has been underwhelming this year due to Covid-19. This is due to the fact that demand for some legal services (such as those associated with transactions) has been weak. However, looking forward, growth is expected to pick up as economic activity rebounds. Next year, analysts expect revenue and net profit to rise 15% and 19% respectively.

Keystone shares are currently trading about 25% below their 2020 highs on a forward P/E of about 30. I think that valuation is very reasonable given the ‘scaleable’ nature of the business. I’m quite excited by the disruptive potential here.

three-year revenue growth of 300%

Finally, I also like Alpha FX (LSE: AFX). It’s a fast-growing (three-year revenue growth of 300%+) financial services company that helps businesses manage currency risk. Like Keystone Law, it’s a founder-led company.

Alpha FX issued a very encouraging trading update recently. In this update, the group advised it recorded a “strong performance” in October and November, with H2 2020 revenue across all business divisions growing versus the comparable period in H2 2019. As a result of this performance, it said it expects full-year earnings to be ahead of expectations.

I last covered this monster growth stock in early November. At the time, I said it was a ‘buy’. Since then, it’s jumped 16%. I think it has plenty more growth to come however. At its current forward-looking P/E of around 32, I see further upside in 2021 and beyond.