2 UK growth stocks under £5 to buy right now

UK growth stocks have lost popularity, with a 2022 correction. However, as a result, many are now trading at low prices. And investors can now get more shares in many of these businesses than a year ago for the same amount of money.

That is certainly the case for the two UK stocks in my portfolio. Both companies have lost a lot of momentum. But looking at the fundamentals, the business continues to thrive, despite some economic problems. Let’s take a closer look at why I think these companies will bounce back over the long term.

Top growth stocks under £5?

As the cost-of-living crisis continues to heat up, discretionary consumer spending has fallen significantly over the past 12 months. And this puts a lot of pressure on businesses, especially in the e-commerce sector.

Most companies are busy cutting costs, with marketing budgets first on the chopping block. While this trend is temporary, there is a lot of pressure dotDigital Group (LSE: DOTD). The software-as-a-service company provides a digital marketing automation platform. This allows businesses to engage with customers more effectively through email, text, social media and other means of communication.

Today, the growth stock trades at just 88p compared to a peak of almost 300p in 2021. As demand eases, dotDigital’s top line expands, and its sky-high valuation falls. But looking at the latest results, growth is far from stagnant.

Revenue has jumped 9% to £33.8m while operating profit has fallen 16%. The latter looks like a barrier on the surface, but on closer inspection it actually increases rental activity. It turns out that management is so confident about the company’s long-term potential that it is trying to lay off its competitors.

While this growth is far from 2020 levels, I remain optimistic about dotDigital’s potential. Trading at a P/E ratio of 23, the growth stock is priced below its historical average. And while the group faces fierce competition with deeper pockets, the company remains debt-free with a proven platform that creates great value for customers.

Invest in infrastructure

Another company that seems to have lost some love lately is Somero Company (LSE: SOM). As a quick reminder, it designs, manufactures and sells laser-guided concrete screed laying machines. Hardly the most exciting opportunity, I know. But the product portfolio has proven to be very popular among construction companies, large and small.

In addition to providing a high-quality surface finish, these machines drastically reduce the labor required, significantly reducing operating costs for customers.

Revenues in 2022 average $133.6m (£111.05m). That certainly doesn’t sound like a growth stock. However, it should be noted that 2021 attracted a lot of growth that saw the top line increase by more than 50%. Combined with shortages and continued delays in Europe and Australia, it’s surprising that Somero was able to follow last year’s results, despite the problems. At least, I think so.

Obviously, shipping delays to international markets are a problem, especially if they continue to drag on operations in the long run. But with the share price reduced to 350p, delivering a P/E ratio of just 7.5, it’s a risk I feel is worth taking.