1 of the top UK shares with compelling reasons to buy 

All UK stocks worthy of inclusion in a portfolio must demonstrate the potential to deliver returns worthy of investors over time. And I have found one thing to think about now.

Staffing and recruitment specialist ST3 (LSE: STEM) is trading well. And the January full-year results report is headlined with: “Recorded profit performance up 24% driven by continued demand”.

Materially ahead of expectations

The company describes itself as a global specialist talent partner focused on roles in Science, Technology, Engineering and Mathematics (STEM). And for the trading year to 30 November 2022, the business generated net fee performance “front matter” of expectations before the director. And it reaches 19% higher every year.

The outlook statement is bullish. And I think higher performance combined with positive expectations make SThree worthy of further research.

Meanwhile, with the share price close to 443p, the forward earnings multiple is just above 10 for the trading year to November 2024. And the anticipated dividend yield is about 3.8%. This is not a very high price. And the balance sheet looks strong.

However, there is no denying the vulnerability of business to the general economic cycle. And that appears in the patchy multi-year record for earnings, cash flow and shareholder dividends.

On top of that, stock prices have generally moved sideways rather than higher over the past half-decade. However, past performance is not a reliable guide to the future. And maybe the business can enter a period of sustainable growth. Indeed, the stock may outperform some previous trades, although the results are uncertain.

Growth happens

However, it also has cyclical characteristics, it seems like the company is growing. And a multi-year holding period can help investors capture some of the potential upside from business expansion.

I see record revenue as encouraging. In 2017, the company achieved a turnover of £1,115m. But City analysts predict revenue will grow to around £1,588 million in the trading year to November 2024. And that leads to a compound annual growth rate for revenue running at around 8%.

In January, chief executive Timo Lehne said the company had “a clear strategic vision and execution plan”. And focus on an analytical and fact-based approach. Meanwhile, SThree has a “healthy” contract order book. And the general macroeconomic and geopolitical situation has improved since the end of last year.

Lehne considers the company’s global reach combined with a special focus on structural STEM disciplines to support proven evidence. “tough” business model. And the business is in a strong position to pursue it “unique” opportunities through medium to long term.

So, despite the risks, I think the business and the stock now look attractive in the long term. It can, for example, sit well in a portfolio of diversified positions aimed at dividend income and capital growth.

Investors with cash may want to look for opportunities now with more in-depth research and form their own opinions.