Why Micro Focus International plc is set to be a millionaire-maker stock

Bilaal Mohamed thinks software giant Micro Focus International plc (LON:MICRO) could deliver riches for long-term investors.

| 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.

People often ask whether or not it really is possible for ordinary retail investors to become millionaires simply by investing in the UK stock market. The answer of course is yes, and I’m not talking about the dim and distant past. Indeed, Individual Savings Accounts (ISAs) were introduced less than 20 years ago, and yet there are plenty of ISA millionaires to be found up and down the country.


One way to achieve this dream could be to stake a claim in a handful of speculative stocks hoping that they’ll become the next ASOS or Domino’s Pizza, both of which have seen their shares prices explode over the years and turned early stakeholders into multi-millionaires.

But there is another way. Spectacular returns can also be realised by investing in larger, more established companies that have a proven business model and delivered a track record of profitable growth. Take Micro Focus International (LSE: MCRO) for example. The FTSE 100 software giant has a market value in excess of £9bn, and yet it still manages to deliver double-digit earnings growth year-in year-out.

Very enticing

Interim results announced this morning revealed a mammoth 80.3% increase in revenues to $1.2bn for the six months to 31 October, with the newly acquired Hewlett Packard Enterprise (HPE) Software unit contributing a very significant $569.8m. Operating profit for the period rose 34.7% to $220m, while pre-tax profits soared 28.7% to $145.7m, compared to $113.2m for the first half of the prior year.

Clearly, the merger with HPE Software is having an immediate positive impact, with the enlarged group now one of the world’s largest pureplay software companies. Going forward I see huge growth opportunities, with recent acquisitions giving the company a wider geographical footprint and access to more markets around the world.

The share price has pulled back sharply from last year’s all-time highs of 2,871p, and plunged further today after the results missed some analysts’ expectations. But I see this dip as a great buying opportunity with the shares now trading on a very enticing price-to-earnings ratio of 14.

Double-digit growth

Another, much smaller, software firm that I believe could be a millionaire-maker over the longer term is AIM-listed technology minnow Ideagen (LSE: IDEA).

Valued at just over £200m, the Nottingham-based firm is but a fraction of the size of its FTSE 100 counterpart, and yet boasts a customer base of over 3,000 organisations that use its wide range of information management software products, including high-profile names such as the European Central Bank , Royal Dutch Shell, Emirates Airlines, and BAE Systems.

As I predicted last July, the share price has now breached the £1 mark, but I believe this is just the start. The company has been growing its earnings at a double-digit rate every year since it went public in 2012, and its earnings multiple of 25 may be expensive-looking but still manages to compare very favourably to other high-growth technology firms in the software arena.

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 owns shares of and has recommended ASOS. The Motley Fool UK has recommended Domino's Pizza, Micro Focus, and Royal Dutch Shell B. 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 colleagues high-fiving each other at work
Investing Articles

Is Legal & General Group one of the FTSE 100’s greatest value shares?

Legal & General shares boast low P/E ratios and massive dividend yields. Could they be one of the London stock…

Read more »

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

I’m looking for the best FTSE 100 value stocks to buy now. Have I found them?

Barclays, NatWest, and Imperial Brands shares are recovering strongly. But these FTSE 100 stocks still trade on rock-bottom earnings multiples.

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Where on earth will Nio stock be in 1 year?

Nio stock has demonstrated extraordinary volatility over the past 12 months, but where will it be in a year's time?…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

6.9% dividend yield! 2 cheap stocks to consider for a £1,380 passive income

Looking for a market-beating passive income? These FTSE 100 and FTSE 250 dividend stocks could provide a healthy second income…

Read more »

Mature black couple enjoying shopping together in UK high street
Investing Articles

Potentially 34% undervalued, should I be watching the boohoo share price?

The boohoo share price has seen a rocky few years, but with signs that the economy is improving, could this…

Read more »

Investing Articles

Is the Amazon share price primed for a drop?

The Amazon share price has been on a tear for the last year, but can this trend continue? Gordon Best…

Read more »

Photo of a man going through financial problems
Investing Articles

Down 15% in a week! What’s gone wrong with the National Grid share price?

The National Grid share price isn't supposed to crash but now it has. Harvey Jones is wondering whether to take…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

Taylor Wimpey just paid me £158.78. I’m aiming to turn that into a £100k yearly second income

Harvey Jones says small, regular dividend payments can turn a few pounds into a mighty second income, if he gives…

Read more »