3 Tech Stocks That Could Smash The FTSE 100: ARM Holdings plc, Pace plc And Imagination Technologies Group plc

ARM Holdings plc (LON: ARM), Pace plc (LON: PIC) and Imagination Technologies Group plc (LON: IMG) could be winning investments

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

ARM Holdings

It’s been a rather disappointing year thus far for a number of UK-listed tech stocks. Indeed, the likes of ARM (LSE: ARM) (NASDAQ: ARMH.US), Pace (LSE: PIC) and Imagination Tech (LSE: IMG) are all in the red this year, with a weaker wider market not helping to improve sentiment in the three stocks.

However, their long-term futures look bright and they could be well worth buying a slice of at current price levels. Moreover, they could outperform the FTSE 100 moving forward – here’s why.

ARM

Although sentiment in ARM is at a low ebb, the company continues to offer the most reliable earnings growth profile among UK tech companies. Indeed, during the last five years, ARM has increased earnings in each year and is forecast to do the same in each of the next two years.

Certainly, its growth numbers are lower than their previous highs, but ARM still seems to offer growth at a reasonable price as it becomes a more mature and less risky proposition. With ARM currently trading on a price to earnings growth (PEG) ratio of 1.3 and having a nimble, fast-paced business model that is key in its niche, it could be well-worth buying at current price levels.

Pace

After issuing a profit warning three years ago, Pace has moved from strength to strength. Earnings have risen by 49% since 2011 and are set to increase further over the next two years at a rate of 12% in the current year and 8% next year.

Despite this, the company continues to offer top notch value for money. This has been aided by a recent fall in its share price, with shares in Pace falling by 39% since March of this year, and means that they now trade on a price to earnings (P/E) ratio of just 9.5. With above average growth prospects, this equates to a PEG ratio of just 0.8, which means that Pace could prove to be a superb play over the medium term.

Imagination Technologies

Also falling heavily this year is Imagination Tech, with its share price being a third lower than in June 2014. Indeed, Imagination Tech is set to disappoint investors in the current year, as its bottom line is expected to be 16% lower than it was last year.

However, this is not an unusual occurrence for Imagination Tech. Over the last five years its bottom line has been hugely volatile but, over the medium term, it generally moves in the right direction. So, it’s of little surprise for this year’s disappointing estimates to be followed by an upbeat growth forecast of 36% for next year.

This puts Imagination Tech on a PEG ratio of 0.5, which means that it offers volatile growth at a reasonable price and, as a result, could outperform the FTSE 100 in the future.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings. The Motley Fool UK owns shares of Imagination Technologies. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Finger clicking a button marked 'Buy' on a keyboard
Investing Articles

Analysts have upgraded this FTSE 100 stock to Buy. What should investors do?

Associated British Foods shares have been uninspiring for some time. But is it finally time to consider buying the FTSE…

Read more »

Man changing battery on electric bicycle
Investing Articles

Prediction: in 12 months the sizzling National Grid share price could turn £10,000 into…

It's been another solid year for the National Grid share price and the dividend yield is decent too. So why…

Read more »

Businessman using pen drawing line for increasing arrow from 2024 to 2025
Investing Articles

Up 185% in 3 years, why does the market love this FTSE 250 stock

Over the past three years, this stock has vastly outperformed the FTSE 250. Dr James Fox takes a closer look…

Read more »

A handsome mature bald bearded black man in a sunglasses and a fashionable blue or teal costume with a tie is standing in front of a wall made of striped wooden timbers and fastening a suit button
Investing Articles

Looking for growth, dividends, or value? These 3 ETFs could be smart ideas to consider

Exchange-traded funds (ETFs) provide a way for investors to spread risk without sacrificing the possibility of huge long-term returns.

Read more »

Happy couple showing relief at news
Investing Articles

Is the Rolls-Royce share price fast becoming a joke?

The FTSE 100 engineering titan has done brilliantly in recent years. But our writer wonders whether the Rolls-Royce share price…

Read more »

Middle-aged white male courier delivering boxes to young black lady
Investing Articles

Is there a ‘best age’ to start buying shares?

Christopher Ruane weighs some possible pros and cons of waiting to start buying shares for the first time, versus starting…

Read more »

piggy bank, searching with binoculars
Investing Articles

Is it time to look again at the FTSE 250’s worst performers?

Our writer considers the prospects for two of the worst-performing shares on the FTSE 250, with falls of at least…

Read more »

A handsome mature bald bearded black man in a sunglasses and a fashionable blue or teal costume with a tie is standing in front of a wall made of striped wooden timbers and fastening a suit button
Investing For Beginners

Down over 40% in the past year, I think investors should consider these value shares

Jon Smith points out two value shares that have fallen heavily over the past year but are starting to look…

Read more »