Share price rise
LTG was an established e-learning and training provider prior to the pandemic, but now its services are in higher demand than ever. Many employers may never have workers in the office again but training staff remains essential. I am an advocate of tech stocks and have a dedicated section for them on my best-stocks-to-buy-now list. LTG’s position on this list is safe.
Reviewing its performance on the FTSE AIM, the share price has increased close to 500% in the past five years. This time five years ago, shares were trading for 30p per share. More recently, LTG’s share price passed its pre-crash levels. As I write, I can pick up shares in LTG for 179p per share, which is a post-crash high. On 1 February 2020, shares were trading for 164p.
Best stocks to buy now perform consistently
In LTG’s most recent full-year results, announced in March for the year ending 31 December 2020, revenues increased by 2% and net income increased 60%. Uptake in its software and platforms increased and the company expanded its footprint in the US and Asia Pacific regions. It also reported a profit of over £13m.
LTG has a proven history of acquisitions, which it then incorporates into its offering. I am usually buoyed by firms that acquire competitors as I see this as a positive sign when I am assessing investment viability. It made three major acquisitions in the fiscal year of 2020.
LTG also reported net cash increased from £3.8m in 2019 to a huge £70.2m in 2020. This propped up a robust balance sheet and LTG maintained its dividend at £0.50 per share.
LTG has continued to perform well for a few years now. Since 2017, revenue and net income have been increasing year on year. Furthermore, cash flow has also been increasing in the same period while liabilities have been decreasing, which is a positive sign.
The majority of my best-stocks-to-buy-now-list consists of firms that have similar performance history over a number of years, and LTG is no different. Past performance is not an indicator of future success. I use it as a gauge when assessing a stock’s investment viability.
Risks and my verdict
I have two main concerns with LTG. First, acquisitions do have the potential to devalue a firm. When an acquisition takes place there is a proportion of goodwill to total assets. This represents the premium paid when acquiring another business. I believe that a large portion of goodwill is a concern. For example, anything above 60% could suggest to me that LTG is paying too much.
Finally, the pandemic is still rife and there are concerns of a third lockdown. Many businesses may need to tighten the purse strings once more if we go into another lockdown and training may not be a priority, which would affect LTG’s bottom line.
Overall, I would still class Learning Technologies Group as one of my best stocks to buy now on my tech stock section. It has performed well recently and historically and its share price continues to climb to reflect positive performance and it also pays a dividend. With £1,000, I would happily invest in LTG.
Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Learning Technologies. 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.