2 exciting tech stocks to consider for your ISA this year

Edward Sheldon looks at two UK-listed tech stocks that could make excellent ISA holdings.

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ISA deadline season is upon us and today I’m looking at two exciting technology stocks that may appeal to those seeking capital growth within their ISA share portfolios.

Playtech

Provider of online gaming and financial trading software Playtech (LSE: PTEC) has enjoyed phenomenal growth in recent years, with revenue increasing from €208m five years ago to €709m last year, a compound annual growth rate (CAGR) of 28%.

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And recent results were excellent, with revenues climbing another 12%, or 20% on a constant currency basis, and adjusted EBITDA increasing 20%, or 32% at constant currency. Key customers such as William Hill, Paddy Power Betfair and Betfred all recently renewed their contracts, and with nine out of 10 of its top customers now signed to long-term contracts, revenue visibility at Playtech is strong. Management stated that 2017 has started well and added that it “remains confident of a strong performance in 2017 and beyond.”

Despite the fantastic growth, Playtech is generating, the shares trade on a very reasonable valuation. Indeed, on a forward-looking P/E ratio of just 12.9 times next year’s earnings, and with a dividend yield of nearly 3%, Playtech looks to offer growth at a great price.  

The majority of City analysts share my thoughts, with sentiment towards the software specialist overwhelmingly positive. From 13 brokers surveyed, 12 rate the stock as a ‘buy’, with the remaining analyst placing a ‘hold’ on the company. Furthermore, there’s some attractive price targets on the stock, with analysts at Morgan Stanley and Berenberg placing price targets of 1,350p and 1,250p on the company respectively.

Playtech shares have risen 13% year-to-date, however in my opinion, there’s further to run.

Telit Communications

Another tech stock exhibiting growth at an attractive valuation is Telit Communications (LSE: TCM).

The Internet of Things (IoT) specialist also published impressive FY2016 results recently, with revenue rising 11% to $370.3m, adjusted EBITDA climbing 19.9% to $54.4m and adjusted earnings per share increasing 21.7% to 26.4 cents. The company reduced its net debt from $29.1m at the interim results stage to $17.7m, and also boosted its cash balance to $9.8m, up from $1.1m at the start of the year. A total dividend for the year of 7.4 cents was also declared, a rise of 23.3% on last year.

Chief executive Oozi Cats stated that the IoT market is “rapidly gaining momentum across an increasing number of industrial enterprises – large and small – around the world”. The CEO added that Telit is “very well positioned to address the numerous opportunities.

Telit shares underwent a significant correction in late 2015 as delays to product launches hit profitability. However the company now appears to have its mojo back, as illustrated by its recent IoT collaboration with tech giant Cisco. Investors have taken note, and Telit shares are already up an impressive 27% this year. However despite the rise, the stock trades on a forward looking P/E ratio of 16.6 times next year’s earnings, which I reckon is a steal for a company operating in such a high growth area. As such, I believe the stock could make an excellent long-term ISA holding for risk-tolerant investors.

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Edward Sheldon owns shares in Telit Communications. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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 considered, so you should consider taking independent financial advice.

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