Is this tech stock one of the best shares to buy now?

Jabran Khan is on the hunt for the best shares to buy now for his holdings and takes a closer look at this FTSE 250 incumbent as an option.

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Since the stock market correction occurred, tech stocks have been out favour as investors look for safer, defensive options. My investment strategy has always been to invest for the long term. With that in mind, could Bytes Technology Group (LSE:BYIT) be one of the best shares to buy now and hold? Let’s take a closer look.

IT solutions and services

As a quick reminder, Bytes is an IT solutions business providing software, hardware, and cloud services. Its most lucrative segment is software, which it sells to public and private sector clients nationally and internationally.

So what’s happening with the Bytes share price? Well, as I write, the shares are trading for 437p. At this time last year, the shares were trading for 463p, which is a 5% drop over a 12-month period. The shares have dropped 24% from 576p since the beginning of the year to current levels. This has been due to the stock market correction.

The bull and bear case

The Covid-19 pandemic highlighted the need for many companies to review their digital footprint as their employees worked from home. This meant firms like Bytes saw an upturn in fortunes as many customers flocked to buy IT solutions to bolster their digital solutions. The continued adoption of technology should benefit Bytes, which means it could boost performance and investor returns in the future.

As well as a burgeoning market that Bytes could benefit from, it already has a good track record of performance and growth in recent years. I do understand that past performance is not a guarantee of the future however. Looking back, I can see that revenue and profit have increased year on year for the past four years. Many of the best shares to buy now have favourable track records.

Finally, Bytes shares could boost my passive income stream through dividend payments. The shares offer a dividend yield of close to 3%, which is higher than the FTSE 250 average of 2%. It is worth noting that dividends can be cancelled at any time.

So to the bear case then. I notice that Bytes shares look a bit pricey at current levels. The shares are on a price-to-earnings ratio of 33. Is expected growth already priced in or are the shares set to continue to drop further before they fall in line with the company’s true valuation? I will keep an eye on developments.

Next, the IT solutions market is extremely competitive and many players are jostling for the same customers and overall market share. One of its main competitors in this space is Softcat. Losing business and market share could have an impact on Bytes’ performance, returns, and the share price.

My verdict

There is lots I like about Bytes. Currently the rewards do outweigh the risks noted above. Would I class it as one of the best shares to buy and hold for the long term? Perhaps, but only time will truly tell and I will keep a keen eye on developments.

Right now I would happily add a small number of shares to my portfolio and hold on to them. Bytes’ growth trajectory, performance track record, and the fact it pays a dividend helps me make my decision.

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 considered so you should consider taking independent financial advice.

Jabran Khan has no position in any of the shares mentioned. 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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