The Motley Fool

Will ARM Holdings plc, Micro Focus International plc And Imagination Technologies Group plc Soar In 2016?

Shares in software product group Micro Focus (LSE: MCRO) have risen by over 10% today after the company released an upbeat set of first-half results. Clearly, this was an important period since it included the performance of The Attachmate Group which was acquired for $2.5bn just over a year ago.

Top of the class

With revenue having more than trebled and pre-tax profit being 92% higher on a constant currency basis versus the first half of last year, investor sentiment in Micro Focus has been given a major boost. That’s at least partly because the performance is at the top end of management guidance and also because the company is on track to meet its medium-to-long term goals.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

In fact, Micro Focus is aiming to deliver returns to shareholders of 15%-20% per annum over the long term, with modest medium term organic revenue growth also set to be achieved. Key to this is a new management structure that will see the current Executive Chairman staying on until at least April 2018. The company’s two divisions, Micro Focus and SUSE, will have two new CEOs from February next year.

Looking ahead to 2016, Micro Focus is expected to post a rise in earnings of 7% and this puts its shares on a relatively appealing price-to-earnings growth (PEG) ratio of 1.9. With dividends being increased by 10%, it remains a strong income stock with impressive cash flow. As such, further dividend rises seem likely and that will make the Micro Focus 2.5% yield hold greater appeal in the coming years.

With an appealing valuation, a rising income outlook and a bright future resulting from past M&A activity, Micro Focus appears to be a sound buy at the present time.

Back with a bang

ARM (LSE: ARM) also seems to be a very appealing purchase for the long term. Its shares were hit hard in the August correction due to the company’s reliance on sales of smartphones across the globe. And with China being a major market for such products, ARM’s shares fell by over 15% during August.

But ARM has staged an impressive recovery since and it now trades within 10% of its all-time high. Despite this, it still offers relatively appealing value for money as its shares trade on a PEG ratio of just 0.6. Certainly, ARM is becoming a more mature company but with double-digit earnings growth forecast for the next two years, it continues to be an excellent long term growth stock.

Long term pick

Meanwhile tech peer Imagination Technologies (LSE: IMG) has endured a very challenging recent past with the company releasing a profit warning in September. It said first-half trading had been disappointing due to a weak semi-conductor market. As such, it expects to make a loss for the period and while second-half trading is expected to be stronger, the company is unsure as to whether it will fully offset its H1 performance.

Clearly, Imagination Technologies is a high quality company that has posted strong earnings growth in previous years. While its outlook is highly uncertain and its shares are likely to be volatile, its PEG ratio of 0.6 indicates that there is a sufficiently wide margin of safety to merit investment for the long term.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Peter Stephens owns shares of ARM Holdings. The Motley Fool UK owns shares of Imagination Technologies. The Motley Fool UK has recommended ARM Holdings and Micro Focus. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.