UK tech stocks are often overlooked by investors. While tech companies drive the market in the US, investors here are just catching up. But the pandemic has boosted our dependence on technology in the supply chain and every day operations across multiple sectors.
Here are two tech stocks that I believe can capitalise on this and grow tremendously over the next decade. I’d buy them today.
Tech penny stock
BATM Advanced Communications (LSE: BVC) specialises in networking, cyber security and tech for bio-medical systems. The company seems poised for growth after the importance of diagnostic lab equipment has increased due to Covid.
It operates in sectors that I believe will grow over the next decade. The focus on emerging markets like China, Mexico and Brazil proved to be prudent when looking at the 2021 first-half (H1) financial report.
The bio-medical side of the business seemed to be growing well, accounting for 70% of total revenue. H1 2021 profits grew 11.7% to $25.7m. Earnings per share rose over 600% to 2.72¢ with a significant jump in gross margins which stood at 36% (29.7% in 2020).
This tech stock jumped from 43p in April 2020 to almost 95p today. Analysts predict 25% growth in revenue for 2021. This is backed by two new cyber security contracts worth $14.1m signed in July 2021.
Penny stocks always carry significant risk this one is no exception. It also faces competition from global cyber security firms and pharma companies that could prove a big hurdle. Its shares are trading at a price-to-earnings P/E ratio of 28.5x, which tells me that the company may be overvalued at the moment. But I think this is a reflection of its potential and the projected growth of the niches it operates in. My hope is that BATM will grow steadily over the next decade and it’s a pick for my long-term portfolio.
FTSE 100 giant
Sage Group (LSE: SGE) is an established UK software company with a history of strong performance in the market. This tech stock is currently trading at 736p with a 23.4% increase over the past six months.
Working on a subscription model, this company provides financial software and cloud storage services to clients. I’m a big advocate for subscription-based services and believe they’re the way forward. Q3 financials looked solid with a 5% increase in recurring revenue, which stood at £1.2bn. Growing revenue contributions from every product category and an expanding presence in northern European businesses is a pleasing sign as a potential investor.
Moreover, 2020’s total dividend stood at 17.25p, which brings the yield to 2.3%. The company also announced a £300m share buyback to be rolled out by January. This should boost shareholder earnings in the short term and is a positive sign for my potential investment.
Sage Group’s expansion plans in the US could be dampened by competition from the likes of big global players like Amazon Web Services (AWS). Yet despite AWS’s market dominance in the US, Sage managed to grow 7% in the region, which is a strong statement of intent to shareholders. This tech stock remains on my long-term investment watchlist and I think it could grow exponentially in the coming decade.
Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028 — more than double what it is today!
And with that kind of growth, this North American company stands to be the biggest winner.
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We think it has the potential to become the next famous tech success story.
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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended 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.