The rising price of Bitcoin over the past few weeks has likely caused some investors to contemplate buying the cryptocurrency. However, while the price of Bitcoin might have rallied recently, its value has been volatile over the longer term.
With that in mind, here are two cyber stocks that appear to offer better long-term outlooks and have the potential to deliver rising share prices as their growth plans come to fruition.
Digital services company Kainos (LSE: KNOS) stormed onto the stock market in 2015, and the enterprise hasn’t looked back since. Recent updates from the firm show its growth isn’t going to slow down any time soon.
Since its IPO, the company’s earnings per share have grown at an annual rate of around 25%. Analysts are forecasting growth of 23% for 2020.
The firm is complementing organic growth with acquisitions. For example, in November of last year, Kainos acquired Adaptive Insights, a financial and business planning software business which is part of Workday Inc, and Formulate, which supports customers in implementing Adaptive Insight’s software.
These deals should help the company meet its growth targets. With nearly £40m of cash on the balance sheet, the firm has plenty of resources to complete other deals as well.
The stock trades on a price-to-earnings (P/E) ratio of 43, which isn’t cheap. Still, the company’s historical earnings growth rate and City projections for next year suggest a similar rate of growth may be achievable over the long term, as the group’s bottom line benefits from its growing stable of businesses.
Another cyber stock with the potential to deliver significant gains in 2020 is accounting software group Sage (LSE: SGE). For the past few decades, the Sage brand has been synonymous with accounting software.
It doesn’t look as if this is going to change anytime soon. Because it takes a lot of time and training to get used to accounting software, clients don’t tend to switch providers very often, which gives Sage a sizeable competitive advantage and sticky and customer base.
This customer base produces a steady, recurring revenue stream for Sage and recent trading updates from the company highlight how management is leveraging the power of the internet to improve profit margins and distribution. The group has been focusing on distributing its software via the cloud, which has increased costs in the short term but should lead to improving profit margins in the long run.
As such, now could be a great time to snap up shares in this software giant at an attractive price. The stock trades on a price-to-earnings (P/E) ratio of 22.8, which suggests that the stock offers a wide margin of safety at current levels. There’s also a dividend yield of 2.4% on offer for income investors. The distribution covered 1.7 times by earnings per share.
As the company pursues its growth plans, Sage offers a lot of potential for capital and income growth over the long run.
Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Kainos and Sage Group. 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.