The Motley Fool

Forget BT! I’d buy this technology share with ‘survive and thrive’ written all over it

Image source: Getty Images.

Telecoms share BT has suffered badly in the recent market crash. But I’d ignore the troubled stock and focus on a smaller company that looks poised to thrive.

In today’s half-year results report, small-cap software and services provider Tracsis (LSE: TRCS) revealed a strong balance sheet – a cash position of £26m as of 31 January and zero borrowings. That sum compares with annual revenue for the trading year to July 2019 of just over £49m and operating profit of almost £7m. That’s a reassuringly large pile of money!

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...

I’d describe the company as being well-financed, which augurs well for surviving the current coronavirus crisis. Just to be sure, the directors have deferred payment of the interim dividend, which will keep £0.3m in its coffers for the time being.

However, when there’s “more clarity” about the ongoing effects of the pandemic on the business, they’ll review the situation. And one possible outcome is the combination of an interim and full-year dividend for the full trading year. Another is the retention of cash in the business “to invest in future growth opportunities.”

Effective acquisitive growth

And that’s what the firm’s good at. An acquisitive growth programme has propelled shareholder returns. Eight years ago, the stock was changing hands for around 67p. Today, it’s at 581p and topped out around 800p in early March before the recent plunge.

I’d have been happy with returns like that and believe there’s more to come from the firm, perhaps much more.

Tracsis built its niche providing software, hardware and services for the rail, traffic data and wider transport industries. Chief executive Chris Barnes said in today’s report that despite the Covid-19 crisis, the Rail Technology & Services division has been “resilient.”

But the Traffic & Data Services division is being “majorly impacted.” However, the firm has taken “a series of actions” aimed at reducing the damage to the business as much as possible.

To put that in perspective, during the last full trading year, around 70% of profit before tax came from the Rail Technology & Services division, and 30% from Traffic & Data Services. Overall, it seems Tracsis is in a good position to trade through the crisis with a contained hit to profits.

During the period, the 2019 acquisitions of Compass Informatics, CTM and Bellvedi “performed well.” And post-period on 10 March, the company acquired iBlocks Limited, a UK-based software company specialising in solutions for the rail industry. The firm’s expansion continues and the outlook is positive.

The growth story remains on track

Looking ahead, the directors are “confident” about the long-term prospects for the business “post-Covid-19.” Profits will likely reduce in the second half of the current trading year because of the crisis. But there are also “positive growth drivers” in the transport markets that the company serves.

For what it’s worth, the company started the first half of its trading year with strong trading. Revenue rose by 41% in the period compared to the equivalent period the year before. And adjusted like-for-like EBITDA elevated by 23%.

I like the look of this one and see the current dip in the share price as an opportunity to research the stock with a view to buying some of the shares for the long haul.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Kevin Godbold has no position in any share mentioned. The Motley Fool UK has recommended Tracsis. 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.