2 technology stocks for ambitious investors

Bilaal Mohamed picks out two high-flying technology stocks that look set for further gains.

| 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.

Ideagen (LSE: IDEA), a leading supplier of Information Management software, revealed a surge in annual profits earlier today as it announced its full-year results for FY2017. The AIM-listed technology business reported another strong performance for the year to 30 April. It was its eighth consecutive year of sales and earnings growth, with total revenues coming in 24% higher at £27.1m, and adjusted pre-tax profits rising to £6.9m, from £5.7m just a year ago.

Fourfold increase

The Nottingham-based firm provides quality, safety, audit, performance and risk-management software and expertise and has operations in the UK, EU, US, and the Middle East. With an excellent portfolio of software products, it helps companies to improve operational efficiency, strengthen compliance, and anticipate and manage every detail of risk, helping to reduce costs and improve efficiency.

With a market value of £166m the AIM-listed group may be considered small-fry when compared to software giants such as Sage Group, valued at £7.2bn, but it can still boast a customer base of over 3,000 organisations that use its products. These include many blue chip names such as BAE Systems, Emirates Airlines, Royal Dutch Shell and the European Central Bank, as well as 180 hospitals in the UK and US.

Despite a fourfold increase in the share price over the last five years, the shares have never breached the £1 mark, but I think this is about to change. With City analysts forecasting a further 28% improvement in underlying earnings for the current year to April, investors should look past the premium P/E rating of 21 and see that this is a price well worth paying for rapid growth.

A better choice?

For those of you who are still uncomfortable with the idea of investing in AIM-listed companies or indeed small-caps in general, then FTSE 100-listed Micro Focus International (LSE: MCRO) could be the answer for those still keen on gaining exposure to the technology sector.

The Newbury-based global software giant isn’t expected to complete the acquisition of Hewlett Packard Enterprise’s software arm until early September, but last week’s announcement of full-year results for FY2017 gave investors plenty to celebrate in the meantime.

Buying opportunity

For the 12 months to the end of April total revenues rose by 10.9% to $1.38bn, with underlying operating profit up by an impressive 20.4% to $640.9m, compared to $532.5m for fiscal 2016. Management duly raised the final dividend by 17.3% to 58.33¢ per share, bringing the full-year shareholder payout to 88.06¢, 32.1% higher than the 66.68¢ it paid out for FY2016.

The shares have now retreated from May’s all-time highs of £26.60 and are looking much better value at just 15 times forecast earnings for FY2018. Of course there are no guarantees in the technology sector, but in my view Micro Focus could be a worthy blue-chip alternative to Ideagen for those who are more risk-averse.

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.

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended Micro Focus, Royal Dutch Shell B, and Sage Group. 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.

More on Investing Articles

Young black woman using a mobile phone in a transport facility
Investing Articles

After soaring 35% this year, is there still value in Barclays shares? Here’s what the charts say!

Barclays has been on a tear in 2024. But where does that leave investors considering buying some shares now? This…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

Nvidia stock has surged 3,450%. This UK investment trust owns loads!

Nvidia's recent amazing price surge has helped boost the value of this investment trust too as the chipmaker is its…

Read more »

Bronze bull and bear figurines
Investing Articles

After the general election what might happen to the FTSE 100?

Our writer’s been looking at the manifestos of the three main political parties to try and understand how the general…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

When will Shein hit the UK stock market and should I invest?

With Shein looking likely to list on the London stock market in 2024, this writer weighs up the case for…

Read more »

Investing Articles

Start supercharging passive income with REITs!

Are REITs the ultimate investment for boosting income generated from a portfolio? Zaven Boyrazian explores some of the most lucrative…

Read more »

Investing Articles

Should I buy more Rolls-Royce shares near 500p?

This investor is wondering whether to buy more Rolls-Royce shares this summer or to just stick with those he already…

Read more »

Investing Articles

After its big fall, is the National Grid share price dirt cheap now?

The National Grid share price fell sharply in reponse to new rights issue plans. But is it an even better…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Starting in June, I’d invest £1,000 a month to aim for a £102,000 second income in retirement

This author highlights a less well-known FTSE 100 stock that could help his portfolio generate a very big second income…

Read more »