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?

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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.

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