The growth of homeworking and e-commerce since the Covid-19 outbreak has supercharged the opportunities for cybercrime. An explosion in hacking and fraud has, in turn, driven demand for online security through the roof. Software maker Kape Technologies (LSE: KAPE), for instance, saw organic sales rise 5% in 2021 as individuals and businesses invested in better protection.
Reflecting this fertile environment Kape Technologies’ share price has risen a handsome 61% during the past 12 months. Yet the tech firm has been on the backfoot more recently and, at 318p per share, it was recently trading at a hefty discount to December’s record of 455p. I think this represents a terrific buying opportunity.
Cyber warfare steps up
I’m not just thinking Kape Technologies will thrive as flexible working methods become commonplace and online shopping expands strongly. A steady rise in state-sponsored cyber attacks is another reason why I expect sales of its software to soar.
It’s not just governments and critical infrastructure that are in the crosshairs of such attacks. This week Britain’s National Cyber Security Centre urged all organisations to bolster their cyber defences following the crisis in Eastern Europe, citing a “historical pattern of cyber attacks on Ukraine with international consequences.”
The increasingly turbulent geopolitical landscape — and the massive sums countries are now spending on their cyber capabilities — means that the internet is likely to become a much more dangerous place for organisations. All this means that demand for Kape Technologies’ products could continue growing strongly.
Expanding for growth
It’s true that Kape faces massive competition from major US software players like Microsoft and NortonLifeLock, to name just a couple. But I like the steps the business is taking to expand its services and take the fight to its rivals.
Last March the business completed the transformative acquisition of information provider Webselenese for a shade under $150m. This business helps consumers navigate the complex world of web security with its product comparison websites and has a global readership that exceeds 100m.
And in December Kape acquired industry rival ExpressVPN for a cool $936m. This move gives the company considerably more scale (with some 6.5m paying subscribers) and exceptional cross-selling opportunities. It also brings one of the industry’s biggest names under Kape’s wing.
Pleasingly Kape’s excellent cash generation means that it should have the capability to continue investing for growth through more acquisitions as well. Latest numbers on this front showed adjusted operating cash flow leapt 66% year-on-year to $14.6m between January and June 2021.
A top UK share to buy today
As I said at the top, the share price has fallen sharply in 2022. And it’s my opinion that this could make the tech giant too cheap to miss.
City analysts think Kape’s earnings will jump 57% in 2022. This leaves the software giant trading on a price-to-earnings growth (PEG) ratio of 0.2. Any reading below 1 suggests that a stock could be undervalued by the market, according to investing theory. This is a cheap UK share I think would be a brilliant buy for me right now.
