Here’s a cheap FTSE 250 stock to buy and hold!

Jabran Khan details a dirt-cheap FTSE 250 stock he would add to his holdings now and hold onto for long-term returns.

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One FTSE 250 stock I’d happily add to my holdings at current levels is NCC Group (LSE:NCC). Here’s why.

Cyber security boom

NCC Group is an information assurance specialist, based in Manchester, UK. It helps ensure that businesses are compliant with their software licensing and assists with cyber security.

As I write, NCC shares are trading for 188p. At this time last year, the shares were trading for 265p, which is a 29% decrease over a 12-month period.

Macroeconomic issues have placed pressure on FTSE 250 stocks in recent times. Growth stocks in particular have experienced a huge sell-off. Investors have reverted to defensive options given current uncertainty. I believe this has caused issues for NCC’s share price in recent months.

FTSE 250 stocks have risks

One of NCC’s burgeoning divisions is its cyber security work. This is arguably what the business is best known for too. There is always the threat that NCC itself could come under threat from a cyber security attack. This could be catastrophic and cause irreparable damage to its reputation. This would, in turn, negatively affect performance, investment viability, and any returns.

Recent macroeconomic issues have caused many tech growth stocks to slump. No one can accurately predict how long these issues will last and how long tech stocks may be out of favour. Could this be a short-term or long-term issue? There is a very real risk that NCC shares could be suppressed for some time due to factors out of its control.

Why I like NCC shares

NCC has a good track record of performance. I do understand that past performance is not a guarantee of the future, however. Looking back, I can see the FTSE 250 incumbents revenue and gross profit has increased year on year for the past four years.

Coming up to date, city analysts believe NCC’s earnings could rise as much as 25% in the financial year to May. This would leave NCC trading on a forward price-to-earnings growth ratio of 0.7. Any reading below 1 usually indicates a stock is undervalued. It is worth mentioning these are just forecasts and may not come to fruition.

NCC is a respected name in the cyber security market. Despite the current tech sell-off, evolving technology, the digital transformation, and the threat of cyber security that comes with all of this means NCC is operating in a potentially highly lucrative growth market in the years to come. I believe this will help boost performance growth and returns.

NCC shares would also make me a passive income from dividend payments. I do understand that dividends can be cancelled at any time, however. NCC’s current yield stands at 2.4%. The FTSE 250 average yield is just under 2%.

Overall, I believe NCC shares are cheap at current levels. With over three decades experience as well as a good track record of performance, I believe the coming years could be a lucrative time for it. The recent tech sell-off doesn’t concern me. I invest for the long term and I’d add cheap NCC shares to my holdings now and keep hold of them for a long time.

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.

Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended NCC. 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.

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