1 top UK technology stock I’d buy today

Right now, the world is in the midst of a technology revolution. Here, Edward Sheldon highlights a UK tech stock he’d buy today.

| 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.

Technology stocks are rising again. For a while, tech stocks were out of favour because investors were focused on reopening plays. However, it seems the market has suddenly remembered there’s a digital revolution under way and money is now rapidly flowing back into the tech sector.

Here, I’m going to highlight a top UK tech stock I’d buy today. I think this stock has a lot of potential in today’s digital world.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

A top UK technology stock

Gamma Communications (LSE: GAMA) is a leading provider of unified communication (UC) solutions. UC incorporates voice and video calling, video conferencing, messaging, team collaboration, file sharing, and more. 

The reason I’m bullish on Gamma Communications is that it looks set to benefit from the remote-work trend. Today, employees don’t need to be confined to a specific desk, phone, or computer to do their jobs. With the right technology, they can work from anywhere (as long as there’s an internet connection).

As more businesses go digital in the years ahead, Gamma should prosper. It’s worth noting that experts believe that between now and 2025, the unified communications-as-a-service market is likely to grow at a rate of around 25% per year. 

Strong growth

Gamma has an impressive growth track record. Between 2015 and 2020, revenue climbed from £191.8m to £393.8m. Over this period, net profit also jumped from £18.3m to £64.2m.

Earlier this week, the company said it had seen continued growth in the first half of 2021. It also said it expects full-year results to be in the upper half of market consensus estimates. 

A high-quality company

Top-line growth isn’t the only thing I like about Gamma Communications. This is a high-quality company. Recurring revenue is high at around 90% of total revenues and profitability is excellent (five-year average return on capital employed of 26.1%). The balance sheet’s strong too and the company also pays a growing dividend. Over the last five years, the dividend payout has risen from 6.6p per share to 11.7p per share.

I also think the stock’s valuation is very reasonable. Currently, Gamma sports a forward-looking price-to-earnings (P/E) ratio of about 34. In my opinion, that’s not particularly high given the company’s track record, quality attributes, and long-term growth potential.

Risks to consider

There are risks to consider here, of course. One’s the threat of competition. Gamma operates in a very competitive industry and it’s a small company compared to some of its peers.

Another risk is that the work-from-home trend could rapidly diminish as the world goes back to normal after Covid-19. I don’t think this is going to happen but if it does, Gamma’s growth could be impacted.

Overall however, I think the stock has an attractive risk/reward profile. In my view, this UK tech stock has considerable long-term growth potential.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Edward Sheldon owns shares of Gamma Communications. The Motley Fool UK has recommended Gamma Communications. 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

Early morning sunlight filtering through the green foliage of an tranquil forest clearing
Investing Articles

Two things I like about Woodbois shares – and three I don’t

Our writer has been thinking about both the positive and negative points of Woodbois stock. Here he shares some insights.

Read more »

Thoughtful anxious asian business woman looking away thinking solving problem
Investing Articles

3 UK shares to buy in a stock market crash

Inflation and rising interest rates have our author on the lookout for a stock market crash. Here’s what he’s looking…

Read more »

Futuristic front of NIO car in Norwegian showroom
Investing Articles

Down over 50%, is NIO stock the best EV pick right now?

NIO stock has dipped over 50% in the past year. Does this create the perfect opportunity to buy or are…

Read more »

Buffett at the BRK AGM
Investing Articles

3 Warren Buffett techniques to build my wealth

Our writer shares a trio of Warren Buffett investing habits he hopes can help him build his own wealth.

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

Aviva shares are in demand. Should I buy too?

Hargreaves Lansdown investors were piling into Aviva shares last week. This Fool is asking whether he should join the queue.

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

3 reasons why I think the IAG share price could rally this year

Jon Smith writes about how improving risk sentiment could help the IAG share price this year, but not without risks…

Read more »

Passive and Active: text from letters of the wooden alphabet on a green chalk board
Investing Articles

A passive income stock I’ve bought to supercharge my wealth!

I think this UK dividend stock is one of the best to buy for healthy long-term passive income. Here's why…

Read more »

British Pennies on a Pound Note
Investing Articles

3 hot penny stocks I’m buying in June!

With their exciting growth potential, penny stocks can be great investments. I've found three to buy next month based on…

Read more »