Is Now The Perfect Time To Buy ARM Holdings plc, Adgorithms Ltd And Nanoco Group PLC?

Could these 3 stocks boost your returns? ARM Holdings plc (LON: ARM), Adgorithms Ltd (LON: ADGO) and Nanoco Group PLC (LON: NANO)

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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.

Shares in advertising software business Adgorithms (LSE: ADGO) have fallen by over 60% today after the company released a profit warning. It said that the online advertising marketplace has experienced severe disruption which has resulted in a loss of supply for major online advertising exchanges, as well as a reduction in demand from major media buyers.

The effect of this on Adgorithms’ indirect revenue generation is due to be substantial and, looking ahead, is expected to continue in the short run. As such, its profit for the full-year is now due to be well below previous market expectations, thereby severely hurting investor sentiment in the stock.

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In the longer term, Adgorithms still appears to have a bright future, with its SaaS solution still likely to benefit from improving demand. And, with the company reporting today that it is beginning to see traction with its SaaS platform, its strong pipeline of opportunities has the potential to be turned into profitable contracts.

Certainly, Adgorithms has potential in the long run but, in the coming weeks its share price could come under further pressure if, as expected, the challenges it is currently facing continue to persist. As such, it is a stock to watch, rather than buy, at the present time.

The same appears to be true for LCD screen specialist Nanoco (LSE: NANO). It has a highly appealing product which, as regulations surrounding the use of heavy metals in screens increases, could grab a larger market share. However, it has been loss-making in each of the last four years, with pretax losses widening during that period.

Of course, Nanoco is expected to deliver a profit next year and, while this may cause investor sentiment to improve somewhat, its move from red to black (regarding its bottom line) already seems to be priced in. For example, Nanoco trades on a forward price to earnings (P/E) ratio of 37. Even for a high quality business with an exciting future, this seems relatively high, although should it deliver on its profit guidance then it may be worth buying further down the line.

One stock which does appear to be a buy right now is ARM (LSE: ARM). Its business model is hugely appealing, since it focuses on intellectual property rather than manufacturing and this allows it to be at the forefront of technological advances while retaining a relatively capex-light business model.

As such, its profitability continues to be exceptionally high, with its return on equity reaching almost 20% last year despite it being a mature company with a debt-free balance sheet. And, with its shares trading on a price to earnings growth (PEG) ratio of just 1.6, it seem to offer growth at a reasonable price. Furthermore, unlike a number of its technology sector peers, ARM is a relatively reliable growth stock, thereby offering a high return/lower risk profile for long term investors.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

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

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