A FTSE 350 technology stock that I think could soar in 2022!

Fool contributor Daniel Moore has his sights set on a technology stock in the FTSE 250 that could boost his portfolio this year.

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Environmental technology concept.

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In the wake of the Russian invasion of Ukraine, national defence and security has become of utmost concern subsequent to a long period of neglection. Energy interdependence and cyber threats are of particular importance. A technology stock with good fundamentals, a diversified revenue model and significant exposure to the aforementioned sectors is NCC Group (LSE: NCC).

Energy and cyber security

NCC offers cyber solutions for potential risks relating to software and cloud computing, supply-chain risks and threat intelligence among many others. Its clientele includes Sennen, data operator for London Array (one of the world’s largest offshore windfarms), National Grid and NatWest. Considering energy security is now an extremely high priority for Western European nations, this is certainly a business that I would like to be in. Rishi Sunak’s Spring statement references a minimum increase of £1bn (3%) to defence spending this year and a focus on the mitigation of Russian exposure. I believe NCC is well positioned to gain more private and public business contracts should this be the case; however, there is a certain reliance on energy security being of huge importance in the future.

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Consistency is key

Out of the entire FTSE 350 index, NCC has generated the most consecutive years of turnover growth at 17. Exacerbating the impressiveness of this statistic is the fact that NCC Group has the smallest market capitalisation out of the entirety of the constituents at just £581.8m. Even with macroeconomic periods of deterioration — such as 2008 and 2020 — and businesses being strapped for cash, NCC has still expanded operations, demonstrating that its services and products are of a high quality and are a necessity for corporate security.

The past performance is excellent; however, the market price of a security can be erased overnight if the future expectations are not robust. Unsurprisingly, NCC’s forecasts look brighter than ever with its annual turnover growth projected at 16% this year alongside cash flow growth of 23%. What makes the valuation even more appealing is the fact that NCC ranks first out of nine companies in the computer services subsector when analysing the companies’ PEG ratio, which is the price-to-earnings (P/E) ratio relative to earnings growth.

Directors want in

In financial markets, directors and executives of a company can sell shares for a variety of different reasons such as tax efficiency or additional income, but there tends to be only one incentive for them to buy shares in their company, and that is because they expect the price to rise meaningfully.

Back in January 2019, the directors at NCC bought approximately £185,000 of shares in the company at £1.30. Between then and September 2021, the share price rose 167%. Clearly, the directors know what they are doing regarding the performance of their own business.

Since then, the NCC share price has fallen by 43.4% with no tangible negative news or downturn in business. In October the directors executed over £40,000 in options and purchased over £50,000 in stock at £2.16 per share. Today’s price represents a 12% discount to that.

Assuming business carries on as normal with the rise in defence spending, NCC could have a great opportunity on its hands. Only time will tell if it can execute upon it. Personally, I’m holding off just for now to see how the situation in Ukraine develops and whether cyber and energy security remain topics of public interest.

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