UK shares: 1 cheap tech stock primed for growth

Jabran Khan is looking for UK shares primed for growth to add to his holdings. Here’s a tech stock he likes.

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I believe some UK shares are primed for growth ahead and look cheap right now. One example I currently like for my holdings is Learning Technologies Group (LSE:LTG).

E-learning and training

Learning Technologies Group is a market leader in the fast-growing e-learning and training marketplace. Since forming in 2013, the company has grown into a worldwide business with 5,000 employees and operations in over 30 countries across Europe, the US, Asia-Pacific, and South America.

As I write, LTG shares are trading for 166p. At this time last year, the shares were trading for 177p, which is a 6% decrease over a 12-month period. More tellingly, the shares have dropped nearly 30% from 235p per share in September, to current levels. Recent macroeconomic pressures have resulted in a sell-off in growth stocks, which as placed pressure on shares like LTG.

UK shares have risks

Learning Technologies has seen demand increase due to the Covid-19 pandemic and new ways of enabling workforces throughout the world. As pandemic restrictions ease, there is a chance this demand could dwindle unless working habits are set to change forever as a result of the pandemic. Any drop in demand could affect performance and any returns.

The company also has a track record of acquisitions to enhance its offering and boost growth. I usually like firms that complete acquisitions for this purpose but there is always a risk that this strategy doesn’t work out. There are many examples of this among other UK shares when firms over-pay or are unable to amalgamate the new firm into the existing business. This can be costly.

Why I like LTG shares

Despite the recent drop in the Learning Technologies share price, I do believe it operates in a growth market and is well-placed to benefit in the coming years. I believe that the pandemic has changed working habits and how some businesses operate. The rise of hybrid and home working has increased and many firms have vowed to remain the same for the future. Learning Technologies’ market position and presence in many territories throughout the world should see its performance grow, in turn, offering me a lucrative return over time.

Learning Technologies has a good track record of performance. I do understand past performance is not a guarantee of the future, however. Looking back, I can see revenue has increased for the past four years in a row. Coming up to date, it released a full-year post-close update at the end of last month. It revealed revenues “not to be less than £254 million (2020: £132.3 million)”. This represents excellent growth, in my eyes. Detailed full-year results are expected in April.

I like UK shares that make me a passive income through dividend payments. Learning Technologies shares currently sport a dividend yield of under 1%. I expect this to grow when full-year results are announced in a few months and the coming years as I expect growth to continue. I do understand that dividends can be cancelled, however.

Overall, I think Learning Technologies is primed for growth due to digital transformation and I expect the shares to eventually recover. The current share price drop has created a buying opportunity. The post-close update fills me with confidence of growth in the future, and a dividend for a passive income is a bonus. I’d add Learning Technologies shares to my holdings.

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 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.

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