It’s fair to say that the coronavirus is likely to have a disruptive impact on many companies in the months ahead. For some businesses, the outbreak is an absolute disaster – just look at the share prices of budget airline easyJet and cinema operator Cineworld recently.
Yet not all businesses are likely to fare poorly. Here’s a look at three companies that could potentially see demand for their services increase as a result of the disruption.
Gamma Communications (LSE: GAMA) is an under-the-radar business communications company that is listed on the AIM market. It specialises in unified communications solutions that help companies enhance agility and raise productivity (such as messaging, video calling and instant conference services). It also offers mobile solutions that provide employees with the freedom to work from anywhere. Many companies across the UK are now exploring ways for employees to work remotely due to the coronavirus outbreak. So I think Gamma’s communications solutions could be in high demand in the coming months.
Gamma is a company I’ve had on my watchlist for quite a while now. This is due to its impressive growth (five-year revenue growth of around 90%). The stock has often been a little too expensive for my liking though. However, the share price has fallen from 1,460p in January to 1,075p today as a result of the stock market crash. I think a great buying opportunity has emerged as the forward-looking P/E ratio is now more reasonable at 24.
Another business that I believe could potentially benefit from coronavirus disruption is Softcat (LSE: SCT). It provides IT solutions to organisations and has expertise in the areas of unified communications, mobility services, and collaboration. As companies recognise the need for added investment in technology to enable their staff to work remotely, Softcat could benefit.
Like Gamma, Softcat has often traded at a high valuation in recent years. This is due to the fact that the group has been growing at a rapid rate (five-year revenue growth of nearly 100%). The company is also highly profitable and has a strong balance sheet. Yet recently, the shares have been dragged down by the wider market sell-off and have fallen from 1,260p to around 960p. At that price, the forward-looking P/E ratio is around 26, which I think is very reasonable for this high-quality growth stock. At that valuation, SCT is in my ‘buy-zone’.
Finally, I think Alpha FX (LSE: AFX) looks quite interesting at the moment. It’s a fast-growing financial services company that specialises in providing foreign exchange (FX) hedging services to small-and medium-sized businesses. Major currencies have been fluctuating wildly recently as a result of the carnage in the financial markets (i.e. GBP/USD has fallen from 1.31 to 1.25 this week). As a result, I believe that demand for Alpha’s currency management solutions in the near term is likely to be high.
Like Gamma and Softcat, Alpha is a high-growth company (five-year revenue growth of more than 1,000%) that often trades at a premium valuation. Yet it too has experienced a significant pullback recently. Currently, the shares can be picked up for 1,015p, down from 1,350p in January. At that price, which equates to a forward-looking P/E ratio of about 33, I see it as a ‘buy’.
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Edward Sheldon owns shares in Alpha FX and Softcat. The Motley Fool UK has recommended Alpha FX and Softcat. 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.