Is Iomart Group Plc The Perfect Partner For ARM Holdings plc And Micro Focus International plc In Your Portfolio?

Should you add Iomart Group Plc (LON: IOM) to your portfolio alongside ARM Holdings plc (LON: ARM) 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 cloud computing and managed hosting company Iomart (LSE: IOM) have made a superb start to 2015 and are up 40% since the turn of the year. This means that, over the last five years, they have risen by a hugely impressive 310%, which compares very favourably to larger technology peers such as ARM (LSE: ARM) (NASDAQ: ARMH.US) and Micro Focus (LSE: MCRO). Their share prices are up by 275% and 67% respectively in that five year period and, looking ahead, there could be more growth to come.

Size And Scale

Of course, ARM and Micro Focus are relatively stable, large businesses with track records of growth. For example, in the last four years, both companies have grown their bottom lines in three of them and, at the present time, are in the process of rapidly increasing dividends per share so that investors can more directly partake in the company’s bottom line growth.

In fact, Micro Focus is expected to increase dividends per share by 24% next year, which puts it on a forward yield of 3.2%. And, while ARM’s yield is just 0.8% at the present time, dividend growth of 22% next year should help to improve the yields obtained by its investors. These increases show not only that the two companies are performing well in terms of profit growth, but also that their management teams are confident about their financial standing and, for long term investors, this bodes well.

Growth Potential

Clearly, there is much more to investing in technology companies than income prospects and financial stability. And, despite being somewhat ‘sensible’ investments in terms of having both qualities, ARM and Micro Focus also provide excellent earnings growth prospects, too. For example, ARM is expected to increase its earnings by 74% this year, while Micro Focus’ bottom line is due to rise by 18% in the current financial year.

Interestingly, both of these growth rates are ahead of Iomart’s forecast growth numbers, with it being due to post growth of 15% per annum over the next two years. This, though, is still twice the wider index’s growth rate and means that Iomart trades on a very appealing price to earnings growth (PEG) ratio of just 1. As such, its share price could continue its upward trajectory, and its shares are certainly not overvalued at the present time.

Looking Ahead

In addition, Iomart also offers an excellent track record, with it having delivered profit growth in three of the last four years, just like ARM and Micro Focus. Furthermore, Iomart’s 1.3% yield and 22% forecast dividend growth rate for next year provide evidence of its sound financial standing and, as such, it seems to offer an excellent mix of growth, value and long-term stability. As a result, teaming it up with ARM and Micro Focus in Foolish portfolios seems to be a sound move.

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 and 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

Young Caucasian woman with pink her studying from her laptop screen
Investing Articles

I’m not convinced the Dr Martens share price is a bargain. Here’s why

After the bootmaker reported its full year results today, our writer explains why a Dr Martens share price in pennies…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Should I invest in the S&P 500 or FTSE 100?

Ben McPoland thinks one FTSE 100 stock might offer a compromise between high US market growth and cheap Footsie valuations.

Read more »

Young Caucasian woman with pink her studying from her laptop screen
Investing Articles

How much passive income could I earn by investing £100 a month in UK shares?

With just a £100 monthly investment in UK dividend shares, I could achieve a decent passive income stream of over…

Read more »

Young Woman Drives Car With Dog in Back Seat
Investing Articles

Looking for cheap growth shares? Here’s a FTSE 250 stock to consider in June

Pets at Home shares still look dirt cheap, says Royston Wild. Here, he explains why the retailer might be one…

Read more »

Number three written on white chat bubble on blue background
Investing Articles

The 3 big risks to Lloyds’ share price in 2024!

Is the Lloyds share price one of the FTSE 100's worst investor traps? Royston Wild thinks the bank's shares could…

Read more »

Investing Articles

Up 14% in 2024, what’s next for the Lloyds share price?

This Fool takes a closer look at what prompted the Lloyds share price to rise this year, and offers her…

Read more »

Investing Articles

5 FTSE 100 stocks to consider for a lifetime of passive income

I see lots of cheap dividend stocks in the FTSE 100 right now, but prices are starting to rise. Here's…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

3 growth stocks I’m desperate to buy as the FTSE 100 dips

Never waste a dip, says Harvey Jones. Three of his favourite growth stocks have fallen over the last month and…

Read more »