UK tech stocks have a lower profile than their US peers. But that doesn’t mean UK investors don’t have access to strong growth opportunities.
Shares in both of the companies I’m looking at today have risen by 70% over the last year. Both are established, profitable businesses with solid track records. I think they could be the best UK tech stocks to buy today.
When millions of people began working at home at the start of the pandemic, I expected IT services provider Computacenter (LSE: CCC) to have a good year.
This company provides IT equipment, networking and software for large companies and public sector customers. A sudden surge in demand for laptops, remote access solutions and other related services saw Computacenter’s revenue rise by 8% to £5,441m last year. Pre-tax profit rose by 37% to £201m.
Computacenter has a history of outperforming the market and is run by one of the longest-serving chief executives in the FTSE 250. CEO Mike Norris has been running the business since 1994.
Too late to profit from this tech stock?
There’s obviously a risk that Computacenter’s new business will slow this year. After all, most organisations now have the IT solutions they need to work in the office and at home. A pause in spending seems possible, especially as organisations focus (hopefully) on a return to normal.
The company admits this could happen. In its latest results, Norris said that after delivering the company’s “fastest profit growth” in 22 years in 2020, growing again in 2021 could be a challenge.
However, I’ve been following this business for a number of years. In my experience, Norris has a good track record of giving realistic guidance. He says Computacenter has had a “very positive start to the year” and believes there is a “real” opportunity for profit growth in 2021.
I’d also consider buying Computacenter shares today because I still don’t think they’re too expensive. Last year’s strong profit growth has left this tech stock trading on 17 times trailing earnings. I think that’s a fair price for a business I rate highly.
This gamer won’t stop
My next pick is a pure growth buy. Video game developer Team17 (LSE: TM17) is best known as the owner of the Worms franchise. But the company’s portfolio of games is much broader and includes series such as Overcooked and Escapists.
Lockdown made 2020 a good year for Team17, which launched 10 new game titles along with 34 new content packs. These can be added to existing games.
Sales for the year rose by 34% to £83m, while pre-tax profit was 36% higher, at £26m. Cash continue to pile up on the group’s balance sheet, reaching £62m by the end of the year.
I’m not worried about Team17’s finances or its ability to continue developing games. But I’m a little concerned this tech stock is starting to look expensive.
Based on the company’s 2020 results, Team17 shares trade on 42 times earnings. That’s more than I’d usually pay, but Team17 does benefit from an operating profit margin of more than 30%. That’s higher than UK rivals Codemasters and Frontier Developments.
I’m impressed by Team17’s performance so far and reassured by the calendar of new releases planned for 2021. On balance, I think this tech stock could continue to perform well.
Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Frontier Developments. 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.