Growing tech stock
Kainos is a tech firm that specialises in transforming businesses towards digital working in a cost efficient way. It employs over 2,000 people and operates in 23 countries, giving it a vast reach.
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This type of tech has exploded in the past 18 months or so due to the pandemic. Firms require tech to assist home working as well as changing consumer habits, and digital transformation provides the tool to do this. This is where Kainos comes in. It has benefitted and could continue to do so for years to come.
As I write, Kainos shares are trading for 1,823p. A year ago shares were trading for 1,223p, which is a 49% return. Most of my best stocks to buy now have provided lucrative returns in the past year.
Why I like Kainos shares
- Insiders are currently buying shares, which is a major positive for me. This tells me the people who are running the firm and know its chances of success are willing to part with their own money. After all, who has more information than the people running the company! Chairman Tom Burnet purchased a further 13,685 shares on 17 November, increasing his holding to 28,253 shares in total. His recent purchase was worth £250K.
- Kainos’ performance has been excellent recently. A half-year report announced on 15 November was great. Kainos reported revenue for the period was 33% higher than the same period last year. Adjusted pre-tax profit increased by 12% and cash increased by 29%. These positive results led to an interim dividend of 7.1p per share, which is an increase of 11% compared to last year’s interim dividend. One of the criteria for my list of best stocks to buy now is that they are performing well in their respective sectors.
- Kainos also has a good track record of success. I understand past performance does not guarantee any future performance but I use it as a gauge when reviewing investment viability. I can see revenue, gross profit, and net income have all increased year on year for the past four years. Based on current half-year results, this trend could continue.
The best stocks to buy now have risks too
The main risk associated with Kainos has to be its current valuation. It sports a price-to-earnings ratio of close to 50! At this level shares look expensive. Furthermore, the Kainos share price is close to all-time highs. There is always the risk that shares have peaked. Any negative news or trading issues could see the share price fall.
Despite the risks noted, Kainos is a quality tech firm in a burgeoning market right now. It is capitalising on demand to perform well and pays a dividend providing a passive income. It also has a good track record and when insiders are buying shares, I am buoyed. With £1K to buy shares for my portfolio, I would add Kainos at current levels.