Are ARM Holdings plc, Imagination Technologies Group plc, Quarto Group Inc And Cello Group plc Set To Soar?

Should you buy these 4 technology/telecoms/media (TMT) stocks? ARM Holdings plc (LON: ARM), Imagination Technologies Group plc (LON: IMG), Quarto Group Inc (LON: QRT) and Cello Group plc (LON: CLL).

| 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.

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 Imagination Technologies (LSE: IMG) have risen by around 3% today after it announced additional cost cuts above and beyond those that were announced last month. It plans to cut its cost base by a further $18m per year through reducing its workforce by 200 staff and disposing of non-core units. This should provide the company with a more stable financial footing through which to operate its core activities.

The decision seems to be a sound move by Imagination Tech and it could provide it with a clearer path to profitability in the coming years. With its shares trading on a price-to-earnings-growth (PEG) ratio of just 0.8, it seems to be a relatively appealing buy for less risk-averse investors.

Good time to buy

Also reporting today within the technology, media and telecoms (TMT) space was Cello Group (LSE: CLL). Its shares have risen by 4% after its 2015 results showed a rise in pre-tax profit of 7.1% that has allowed the company to raise dividends by 10%. Furthermore, net debt was reduced from £7.2m in 2014 to £4.2m in 2015 and the company has apparently made a good start to 2016, with encouraging bookings momentum continuing from the final quarter of 2015.

Looking ahead, Cello is forecast to increase its bottom line by 3% this year and by a further 7% next year. This puts it on a PEG ratio of 1.4, which indicates that now could be a good time to buy it – especially since it yields 3.2% from a dividend which is covered nearly three times by profit.

Surprise price drop

Meanwhile, shares in media company Quarto (LSE: QRT) have fallen by 3% today despite it releasing an upbeat set of results for the 2015 financial year. For example, revenue increased by 6%, while pre-tax profit rose by 8%. This allowed the company to raise the final dividend by 15%, which means that it now yields 2.6% and that shareholder payouts are covered 3.4 times by profit. And with Quarto reducing net debt by 10% and delivering on its main strategic objectives, it appears to be moving in the right direction.

Today’s share price fall is most likely due to the announcement that its Chairman Tim Chadwick will step down. Despite this, Quarto’s forecasts are upbeat, with double-digit growth expected in each of the next two years. This puts the company on a PEG ratio of only 0.5, which indicates good value for money.

Shares set to rise?

Of course, one of the main players in the TMT space in the UK is ARM (LSE: ARM). It hasn’t reported today, but with its bottom line forecast to rise by 43% in the current year and by a further 13% next year, it appears to be on the cusp of improved share price performance.

Certainly, the slowdown in China has hurt investor sentiment in ARM, with its shares being down 2% since the turn of the year. However, with such a strong track record of growth and a highly appealing business model, it could easily reverse this period of poor performance and rise significantly over the medium-to-long term.

With ARM trading on a PEG ratio of 0.7, it continues to offer excellent value for money. That’s especially the case since it’s a relatively stable and mature business, thereby making its risk/reward ratio hugely enticing.

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 owns shares of ARM Holdings. The Motley Fool UK owns shares of Imagination Technologies. 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.

More on Investing Articles

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

2 reasons why I’m loading up on FTSE 100 shares

This Fool thinks FTSE 100 shares look cheap. With that, he plans to continue snapping them up today. Here's one…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Why wait? I’d buy FTSE 100 shares now before the next stock market rally!

Our writer explains why he'd snap up what he sees as bargain FTSE 100 shares now rather than waiting in…

Read more »

Investing Articles

Is it time for me to change my tune about Rolls-Royce shares?

This Fool has steered clear of buying Rolls-Royce shares. But after its recent performance, he's reconsidering his stance. Here's why.

Read more »

Investing Articles

Aviva share price: 3 reasons to consider buying for 2024

The Aviva share price is still lower then when I bought some nearly a decade ago. Here's why I'm thinking…

Read more »

Front view photo of a woman using digital tablet in London
Investing Articles

These 2 shares could bank me £328 a month in second income

Jon Smith runs through two FTSE stocks that have above-average dividend yields that could pay out a generous second income…

Read more »

Stack of one pound coins falling over
Investing Articles

This passive income plan is simple – but could earn me thousands!

Christopher Ruane explains how putting a fiver a day to work in the stock market might help him earn thousands…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on

After record profits, are Lloyds shares a buy, sell, or hold?

As Lloyds pulls in pre-tax profits of £7.5bn, boosts its dividend, and continues to repurchase shares, are the company’s shares…

Read more »

Investing Articles

NatWest shares: is a once-in-a-lifetime opportunity on the way?

Should investors get ready for a unique opportunity as the UK government plans to sell off its NatWest shares later…

Read more »