Is Blinkx Plc A Better Buy Than The Sage Group plc Or Micro Focus International plc?

Should you buy a slice of Blinkx Plc (LON: BLNX) instead of sector peers The Sage Group plc (LON: SGE) and Micro Focus International plc (LON: MCRO)?

| More on:

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.

Shares in Blinkx (LSE: BLNX) have nosedived during the course of 2014. Today they trade 87% lower than at the turn of the year and, having fallen by 8% in the last month, are showing little sign of turning their performance around.

Of course, a lowly share price can mean a star buying opportunity for less risk averse investors. However, is now really the time to buy Blinkx instead of more established Software and Computer Services sector peers such as Sage (LSE: SGE) and Micro Focus (LSE: MCRO)?

Transition

It’s clear that Blinkx has considerable future potential. Its video search business model could deliver stunning levels of growth and profitability over the long run. The problem is the short and medium term, since Blinkx is clearly struggling to adapt its offering quickly enough to take advantage of a consumer switch away from the use of desktops and towards the use of mobiles and tablets.

For example, Blinkx described the present time as a ‘year of transition’ in its most recent update, with the company’s revenue stream switching from being almost entirely desktop to being dominated by mobile in a matter of months rather than years. While on paper this may not pose a major problem, it means that Blinkx is forecast to go from a pre-tax profit of over £10 million last year, to a loss of over £2 million in the current year.

As a result, there is concern that, while Blinkx may have a sound strategy, there won’t be sufficient time for it to complete its transition and also to make the post-transition period a profitable one. As such, investor confidence continues to fade and, without a relatively large cash pile, doubts surrounding Blinkx’s viability as a business could have hit its share price even harder.

Looking Ahead

While Blinkx is currently loss-making and has a major question mark hanging over its future profitability, sector peers Sage and Micro Focus offer relatively appealing growth rates. For example, Sage is forecast to grow its bottom line by 9% next year, while Micro Focus’ profitability is forecast to rise by 10% next year. Furthermore, both companies have been profitable throughout the last five years and have grown their bottom lines at an average rate of 7% and 20% respectively during the period.

Although Sage and Micro Focus trade on premium valuations, with them having price to earnings (P/E) ratios of 18 and 16.3 respectively, for example, they appear to offer far more certainty, growth, and better value than Blinkx. Certainly, the long run could see Blinkx deliver a highly profitable business once it successfully transitions to a mobile offering. However, in the meantime things could get worse for its investors, meaning sector peers Sage and Micro Focus seem to be much better buys.

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 Micro Focus. 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

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »