first_img Zaven Boyrazian | Tuesday, 23rd March, 2021 | More on: YU See all posts by Zaven Boyrazian Get the full details on this £5 stock now – while your report is free. The Yu Group (LSE:YU) share price has been on fire this year. In the space of a few months, it has more than tripled. And over the last 12 months, the Yu share price has increased from 67.5p all the way to 357p today. That’s a surge of more than 400%!What caused this impressive growth? And should I be adding the company to my portfolio? Let’s take a look.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Beating market expectationsThe company recently released a trading update that showed some promising results and is likely the primary catalyst for Yu’s surging share price. While no exact figures were published, the independent utility company expects full-year revenue to be north of £100m, beating market expectations. Similarly, underlying profits are also on track to be significantly ahead of expectations.What’s more, the firm has already secured an additional £93m of revenue for 2021 at an improved gross margin through existing customers. And despite the disruptions from Covid-19, it was able to increase its cash position by £9.3m without borrowing any additional capital through loans. In my opinion, the company appears to be doing brilliantly, so seeing the Yu share price surge on this report is not too surprising.Risks to considerYu group is a gas, electricity, and water provider for small and medium-sized businesses. And while the UK business-to-business utility market is growing rapidly, it is a highly competitive and regulated space. Combining that with fluctuating commodity prices means that the firm has virtually no pricing power over its services.Therefore to grow the business, Yu is focusing on acquiring new high-margin customers while simultaneously closing contracts with low-margin legacy customers. Unfortunately, this has also led to customer retention suffering considerably. The firm has reinstated its strategy to maintain a minimum 70% customer retention rate from now on. And with £93m of revenue already secured for 2021, it appears that this goal can easily be achieved. But this may not actually be the case. Let me explain.Yu’s average customer contract length with its customers is approximately 22 months. This means that the acquired clients from 2020 have yet to decide whether they will renew their contracts with Yu. Therefore it is quite difficult to judge what the current level of customer retention is today, and it could be well below the 70% target. Suppose the business cannot convince its new customers to stick around after their contracts expire at the end of this year. In that case, revenue for 2022 could suffer considerably.The Yu share price: time to buy?Over the last three years, Yu’s top-line revenue has increased by an average of 56% annually. Needless to say, the company is growing at an exceptionally rapid pace. And with a price-to-sales ratio of 0.46, the Yu share price does look cheap in my eyes.However, the recent change in its customer strategy is quite drastic and has yet to prove itself. While dropping legacy clients might lead to higher margins, it also means the loss of a revenue source. Therefore I’m waiting for more insight into operational performance throughout 2021, and more importantly, 2022.So for now, I’ll be keeping Yu on my watch list rather than in my portfolio. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Are you on the lookout for UK growth stocks?If so, get this FREE no-strings report now.While it’s available: you’ll discover what we think is a top growth stock for the decade ahead.And the performance of this company really is stunning.In 2019, it returned £150million to shareholders through buybacks and dividends.We believe its financial position is about as solid as anything we’ve seen.Since 2016, annual revenues increased 31%In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259Operating cash flow is up 47%. (Even its operating margins are rising every year!)Quite simply, we believe it’s a fantastic Foolish growth pick.What’s more, it deserves your attention today.So please don’t wait another moment. Image source: Getty Images Our 6 ‘Best Buys Now’ Shares Zaven Boyrazian does not own shares in Yu Group. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Simply click below to discover how you can take advantage of this. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. But I have found another growth stock that could be even more promising… Enter Your Email Address FREE REPORT: Why this £5 stock could be set to surge The Yu share price is up 400% in 1 year! Should I buy now?last_img read more