28% revenue growth per year and down over 20% in price! Should I invest in this niche FTSE 250 company?

Oliver says this FTSE 250 company has done an excellent job bringing auctioning into the modern world. Will he invest in it?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Hand of person putting wood cube block with word VALUE on wooden table

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

As a technology investor primarily, I’m always looking for companies that have something unique on offer. I think the FTSE 250 is a great place to find some of these investment opportunities, especially as the firms are smaller than in the FTSE 100, with potentially higher future growth than if they were already more established.

Bringing together the old and the new

One business, called Auction Technology Group (LSE:ATG), also known as ATG, looks quite strong to me. It operates in the niche of digital auction platforms, and it helps the auction process to run more efficiently. In many respects, it’s helping to keep alive an old sales model by integrating new technology with it.

Auction houses can hire the company and make use of its platforms to list their auctions online. What’s great about this is that it opens up local auctions to a global audience. ATG also offers customer support and marketing.

While the firm faces a few notable competitors, it seems to have acquired most of the firms that offered any lasting threat to its market share. However, let’s not forget eBay, which has arguably continued to change the auction market and drastically reduce traditional auction services.

As such, I think ATG has quite a challenge on its hands in remaining competitive in its niche while also rivalling other digital offerings which focus more on a do-it-yourself model.

From overvalued to undervalued

This is quite a new investment opportunity, as the company had its initial public offering (IPO) in only 2021. ATG has had exceptional growth since then, but this is expected to slow down somewhat over the next three years. Thankfully, the market doesn’t seem to have priced the shares at too high a price. So, as long as the company is still growing, I think it presents an opportunity for me.

You see, around the time of the IPO, the shares almost doubled in price in less than a year. But this is quite common when a company first goes public, and before long, the market readjusts. What may have been an overvaluation then might be an undervaluation now. After all, it’s now down over 20% from the IPO price.

Therefore, as long as the company continues to deliver the growth it has and continues to generate a healthy profit, I think the investment should perform quite well. In my opinion, the wider stock market will soon recognise the value opportunity and begin driving the price back up.

Adapting to technological change

From reading the most recent annual report, I was impressed to see that ATG noted that innovation and change in its industry are rife. I believe this is now more true than ever, and I think the company would be wise to invest more heavily in machine and deep learning capabilities to drive not only efficiency in operations but also the potential expansion of its profitability margins. Failing to invest thoroughly and effectively in these new intelligent technologies could make the firm lose both investors and customers in the long run.

Certainly a great company

Overall, from my research, ATG has a unique and strong position in the future of auctioning. I take my time to make investments, so I’ve put it on my watchlist for now.

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.

Oliver Rodzianko has no position in any of the shares mentioned. The Motley Fool UK 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.

More on Investing Articles

Investing Articles

Up 10% today, I think this FTSE 250 growth share could continue to surge!

Babcock International's flying after upgrading its full-year forecasts. I think the FTSE 250 defence share might just be getting started.

Read more »

Investing Articles

The AstraZeneca share price jumps 5% on today’s strong results – but is it too expensive?

Harvey Jones hails the brilliant long-term performance of the AstraZeneca share price, but wonders whether the FTSE 100's biggest company…

Read more »

Investing Articles

Is this my chance to buy Alphabet shares?

A big step up in AI spending at Google has investors nervous, but has it created an opportunity to buy…

Read more »

Senior woman potting plant in garden at home
Investing Articles

£10k in savings? Here’s how an investor could aim for a monthly second income of £1,200

Mark David Hartley considers how investors could build towards an early retirement plan with a second income from a portfolio…

Read more »

Investing Articles

2 cheap shares to consider buying in a £20k ISA for income of £1,000 a year

Harvey Jones loves buying cheap shares and says these two FTSE 100 stocks look tempting today, especially as they offer…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Is it worth me buying Lloyds shares for 61p after a 49% rise?

Lloyds shares have risen significantly from their one-year traded low seen last February, which could mean no value is left…

Read more »

Investing Articles

I think this FTSE 100 fashion stock could skyrocket in 2025

JD Sports has had a disastrous few months of losses but 2025 looks primed to be the year for this…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Down 13%, this FTSE gem delivers a 9.4% yield and looks 57% undervalued to me!

This is one of very few FTSE 100 stocks with a combination of a 9%+ yield, forecast earnings growth of…

Read more »