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Why I think this FTSE 250 stock presents a buying opportunity

Savvy investors keep abreast of growth industries. The main one I keep a keen eye on is technology. 

In a truly digital age, companies are always looking to streamline their services by using the latest technology. This can include cloud technology, cyber security, data management, and remote working capabilities.

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Last on that list is a very popular one right now as people are being asked to work from home if possible in response to the coronavirus pandemic. Although the market crash will affect all companies, IT firms may see an increase in demand to assist organisations in setting up remote working environments. CEO Mike Norris last week tentatively commented, “in the medium term, customers may postpone significant IT infrastructure projects.”

Computacenter (LSE:CCC) is a well known major player in the IT infrastructure industry. It is engaged in supply, implementation, support, and management of IT systems. 

Performance and recent events

The UK-based organisation has enjoyed some fruitful years in terms of performance. It has gone from strength to strength. It hailed what it said was one of its “most successful years” in 2019 with both revenue and profits reaching their “best ever” levels. 

In its trading update for the year ending 31 December, revenues had risen by an impressive 16% to £5.05bn. It reported that profitability had increased by the largest amount ever. Adjusted profit before tax for 2019 was up 24% to £146.3m.

In light of this impressive performance the dividend was hiked 22% to 37p per share. Computacenter currently has 135 customer relationships worth £1m or more. Just 300 enterprise customers in Europe and the US account for virtually all of its profits today. 

Computacenter has strategically looked to acquire other businesses to further its offering. The upswing in 2019 was attributed to this as it acquired two new businesses in the US and Netherlands. These in turn saw organic revenues grow by 3%. The ability to complete acquisitions is always a positive sign in my eyes when it comes to growth and investment viability.

Crunching the numbers & next steps

The coronavirus pandemic has caused approximately a 40% decrease in share price in the past month. However I would not read too much into this. Short-term pain is to be expected. I would rather focus on the share price performance prior to this period. The share price jumped almost 60% in the previous calendar year before the crash. 

I would also look at return on capital employed, which averaged an impressive near 20% over the past three years. Furthermore it possesses a healthy balance sheet and minimal debt. 

Profit has increased every year for the previous three years. Perhaps more significant is that dividend per share has also increased every year for the past six years. 

At this point it would be irresponsible of me not to urge caution due to the potential for short-term pain in light of current events. Although, just last week the company announced an unprecedented surge in demand for laptops. I believe longer term, Computacenter is a good opportunity that should be seriously considered for your portfolio. I will certainly be keeping a keen eye on this stock.

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Jabran Khan 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.