The Motley Fool

Will Israel-based Taptica International plc suffer the same fate as Telit Communications plc?

Foreign-based AIM small-caps often suffer from a lack of trust among UK investors. But is that surprising? Just look at what happened to Internet of Things manufacturer Telit Communications (LSE: TCM) recently. Investors were already sceptical of the Israel-based company’s accounts, due to the large amounts of expenses it was capitalising. Product delays had further dented sentiment towards the stock.

However in August, Italian newspaper Il Fatto Quotidiano reported that CEO Oozi Cats was in fact a fugitive who had fled the US back in the early 1990s after being indicted for fraud. Telit hired a law firm to investigate its CEO, resulting in a 33% fall in the company’s share price. While the stock has recovered somewhat from its August lows, it’s still down around 50% from the 370p mark it was trading at in May.

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...

Taptica International 

Turning to another Israel-based tech company, Taptica International (LSE: TAP) has seen its share price decline recently too. The £214m market cap company, which offers artificial intelligence-based solutions for mobile advertising and counts Amazon, Facebook and Disney among its customers, has seen its share price fall from 440p in July to as low as 325p in recent weeks. Investors have been concerned that Apple’s new Adblock will cause problems for mobile advertisers. Could the stock be heading for a Telit-style collapse?

Taptica released half-year results this morning and the market appears to be impressed with the numbers. Indeed, the stock is up 10% as I write. Revenue for the half year increased 27% to $65.6m and adjusted EBITDA rose 42% to $13.1m. Net cash from operating activities was strong at $13.7m, resulting in a cash balance of $32.6m at 30 June, up from $21.5m at the end of December. Interestingly, Taptica said it welcomes the browser changes due to be implemented with Apple’s iOS11. The tech firm believes the changes represent an opportunity for the company, as it anticipates greater demand for its services related to in-app marketing.

With earnings of $0.38 forecast for FY2017, Taptica currently trades on a forward P/E ratio of 13.4. Given that many other UK-based smaller companies exhibiting similar growth are currently trading with P/E ratios in the 20s, the valuation is cheap. However, it suggests to me that the market is still a little hesitant about the company.

Safer to stick to the UK?

With that in mind, perhaps it’s a sensible idea to stick to UK-based tech stocks. One such stock that I like is Softcat (LSE: SCT). The FTSE 250-listed IT infrastructure specialist provides organisations with datacenter, business intelligence, cloud, networking and security solutions. It’s worth noting that Neil Woodford is an owner of the stock.

After enjoying a strong share price rise from 300p to 450p between January and May, the stock has retreated a little recently and now trades just over the 400p mark. I believe the pullback may have created a good buying opportunity.

Revenue is forecast to increase 19% this year, and analysts expect a dividend payout of 13.6p, which equates to a yield of 3.3% at the current share price. A forward looking P/E ratio of 20.2 looks fair to me and suggests the market acknowledges the growth story here, but has not got carried away with the valuation. Look out for full-year results on 18 October.

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...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Edward Sheldon has no position in any 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.

Our 6 'Best Buys Now' Shares

The renowned 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 enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.