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Will Earthport plc, Watchstone Group PLC & Micro Focus International plc Beat A Volatile Market This Year?

Shares in cross-border payment specialist Earthport (LSE: EPO) have slumped by 10% today after it released a trading update which highlighted a number of restructuring costs which have impacted its revenue growth rate. The restructuring, though, is set to provide more scalable prospective opportunities and with Earthport’s revenue rising by 18% versus the first half of the prior year, its progress continues to be encouraging.

Specifically, Earthport was able to maintain gross margins at 75% and has increased transaction volumes by more than 70% from the first half of the prior year. And with scope to expand into Asia and the Middle East, Earthport continues to offer a relatively bright long term outlook.

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Looking ahead, Earthport is expected to remain a loss-making entity in the current year and following today’s major share price fall, it may be prudent to wait for further news on its restructuring before buying a slice of the business. That’s especially the case since the market remains nervous following recent index falls, with investors likely to seek out less risky stocks at the present time.

Operating within the same sector as Earthport is Watchstone (LSE: WTG). The company formerly known as Quindell continues to undergo its own restructuring, but interestingly it appears as though it is set on retaining the conglomerate-style structure of its past. Certainly, a number of businesses are being deemed ‘non-core’ and are being disposed of, while others are being merged. However, Watchstone is still comprised of six main businesses according to its website, with them ranging in operations from health care to energy services.

Such a structure may offer a degree of stability on paper since the different divisions may not be highly correlated in terms of their financial performance. However, a conglomerate structure can also lead to inefficiencies and it has therefore become less popular today than it once was. With a number of other tech/finance/health care businesses offering good value for money and bright futures, there appear to be better options than Watchstone elsewhere.

One company which does appear to be worth buying right now is Micro Focus (LSE: MCRO). It has outperformed the FTSE 100 by 43% in the last year and with its bottom line expected to rise by 7% in the next year, Micro Focus remains a relatively consistent and reliable growth play. Furthermore, it trades on a price to earnings growth (PEG) ratio of just 1.9 and this indicates that there is scope for further capital gains moving forward.

In addition, Micro Focus could become a sound income play, too. It may only yield 2.4% at the present time, but it is expected to increase dividends per share by 9% in the next financial year. With dividends being covered 2.5 times by profit, there is the prospect of further rises in shareholder payouts which could cause investor sentiment to improve in the coming years.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended 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.