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Is Now The Perfect Time To Buy ARM Holdings plc, Adgorithms Ltd And Nanoco Group PLC?

Shares in advertising software business Adgorithms (LSE: ADGO) have fallen by over 60% today after the company released a profit warning. It said that the online advertising marketplace has experienced severe disruption which has resulted in a loss of supply for major online advertising exchanges, as well as a reduction in demand from major media buyers.

The effect of this on Adgorithms’ indirect revenue generation is due to be substantial and, looking ahead, is expected to continue in the short run. As such, its profit for the full-year is now due to be well below previous market expectations, thereby severely hurting investor sentiment in the stock.

In the longer term, Adgorithms still appears to have a bright future, with its SaaS solution still likely to benefit from improving demand. And, with the company reporting today that it is beginning to see traction with its SaaS platform, its strong pipeline of opportunities has the potential to be turned into profitable contracts.

Certainly, Adgorithms has potential in the long run but, in the coming weeks its share price could come under further pressure if, as expected, the challenges it is currently facing continue to persist. As such, it is a stock to watch, rather than buy, at the present time.

The same appears to be true for LCD screen specialist Nanoco (LSE: NANO). It has a highly appealing product which, as regulations surrounding the use of heavy metals in screens increases, could grab a larger market share. However, it has been loss-making in each of the last four years, with pretax losses widening during that period.

Of course, Nanoco is expected to deliver a profit next year and, while this may cause investor sentiment to improve somewhat, its move from red to black (regarding its bottom line) already seems to be priced in. For example, Nanoco trades on a forward price to earnings (P/E) ratio of 37. Even for a high quality business with an exciting future, this seems relatively high, although should it deliver on its profit guidance then it may be worth buying further down the line.

One stock which does appear to be a buy right now is ARM (LSE: ARM). Its business model is hugely appealing, since it focuses on intellectual property rather than manufacturing and this allows it to be at the forefront of technological advances while retaining a relatively capex-light business model.

As such, its profitability continues to be exceptionally high, with its return on equity reaching almost 20% last year despite it being a mature company with a debt-free balance sheet. And, with its shares trading on a price to earnings growth (PEG) ratio of just 1.6, it seem to offer growth at a reasonable price. Furthermore, unlike a number of its technology sector peers, ARM is a relatively reliable growth stock, thereby offering a high return/lower risk profile for long term investors.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.