French company Schneider Electric announced it is considering a possible offer for the entire stock. The news gave a welcome boost to the Aveva share price, which had been drifting downwards over the past 12 months.

Schneider already owns 60% of the engineering software company. So should a takeover attempt actually happen, it seems like it could be a done deal. But there’s no guarantee yet.

On Thursday, Aveva pointed out that “there can be no certainty that any offer will be made, nor as to the terms on which any offer will be made (should one be made)“. Any possible offer “would be evaluated by an Independent Committee of the Board of Aveva, together with its advisers“.

Aveva added that “pending any further announcements Aveva shareholders should take no action“.

Sell, or buy?

Well, no action in terms of what shareholders might need to do should a buyout offer emerge, that is. Whether to sell now, after the share price spike, is up to individuals. And I suspect a good few will have done exactly that, pocketing a nice profit.

But I’m more interested in what investors who don’t currently hold Aveva shares should do. Should we buy? If we think an offer is likely to be significantly ahead of the current share price, then we might be looking at a quick gain.

It’s hard to put a reliable valuation on Aveva shares, as the company recorded a pre-tax loss last year. It was down to “the amortisation of intangible assets of £226m“. And that kind of thing makes me twitchy — I don’t like so see what often look like finger-in-the-air valuations of intangible stuff.

Valuation

Still, Aveva reported an adjusted earnings per share figure of 99.6p. That puts the shares on a trailing price-to-earnings (P/E) ratio of 28, after Wednesday’s share price hike. On Tuesday’s closing price, it would have come in at 22.

Those are significantly higher than the FTSE 100‘s long-term average. But for a software technology company with possible growth prospects, it might still represent an attractive valuation.

I do like the sound of Aveva’s technology. It specialises in data management and cloud computing systems for the energy sector. And with efficiencies in the energy sector almost certainly growing in importance in the coming years, I can see a healthy market.

Short-term punt

But the idea of investing in Aveva based on long-term prospects has just been put on hold. Anyone buying now would be taking a punt on whatever offer Schneider might make. If it’s a decent premium, there could be a quick profit. And I won’t be surprised if an attractive offer does emerge.

But if speculators should push the Aveva price much higher, it might look a bit too rich. And Schneider could walk away.

Aveva shares would surely fall back again if that happens. And then I’d seriously consider buying for the long term. But right now, I won’t buy in a bid for a quick profit, as I would see it as nothing more than a gamble.

The post This FTSE share just jumped 25%. I’m wondering whether to buy appeared first on The Motley Fool UK.

No proposal has been formally made, but I’d note that Schneider already owns almost 60% of Aveva. Given the majority shareholding, my view is that this deal is likely to go ahead.

Aveva share price: too late to buy?

But what now? Is it too late for me to buy the shares?

As a long-term investor, I tend not to get involved with takeover news. Although the Aveva share price could rise further, I’d rather focus on other Footsie shares that might look attractive to suitors in the future. As such, I won’t be buying Aveva shares today.

But there is one FTSE 100 stock that I would buy.

FTSE 100 top pick

I’m referring to Howden Joinery (LSE:HWDN). Its shares are looking particularly attractive to me right now. Note that its share price has fallen by over 30% in the past year. Given the cost-of-living crisis and expectations of a housing downturn I’m not too surprised to see it tumble.

But the shares are now at levels seen three years ago, and I reckon it could be a good opportunity to buy some for my Stocks and Shares ISA.

Howden is a well-known kitchen supplier. It uses a distinct business model that focuses on the relationship with builders and fitters. By doing so, it creates repeat custom.

It also enables the business to streamline its structure and allows it to operate at low cost. That’s particularly the case when comparing it with competitors that require large and expensive showrooms.

Impressive metrics

It’s this model that gives Howden some impressive metrics. For instance, it has a return on capital employed of almost 30% and a profit margin of nearly 20%. In addition to a 3% dividend, these are impressive numbers that highlight the quality of its business.

It recently delivered a strong financial performance, well ahead of pre-Covid levels. And it looks like it is effectively managing through inflationary and supply chain pressures.

I do need to bear in mind that these pressures are ongoing. Any weakening consumer confidence could impact the demand for kitchens over the coming months. The Bank of England is expected to raise interest rates further this year, and the impact this has on the housing market and Howden’s business is uncertain.

That said, this is a resilient, profitable, and cash-generative business. With a price-to-earnings ratio of just 11 times, I’d say it’s also cheap. Lastly, it’s trading at an attractive share price, and I’d expect it to double within the next year or two.

That’s why I’d ignore the Aveva share price today and buy Howden Joinery instead.

The post Aveva share price soars 30% on buyout news! Here’s what I’d do now appeared first on The Motley Fool UK.

An auction that I’m bidding on

As a relative newcomer to the FTSE 350, Auction Technology Group (LSE: ATG) hasn’t had the easiest inaugural term. It made its stock market debut in February 2021. Since then, it has proven to be a company that can either outperform or underperform significantly.

Auction Technology Group specialises in providing online auction facilities to a global audience in a variety of niches — for example, antiques, art and fashion, as well as industrial and commercial equipment. As you can imagine, Covid-19 really boosted turnover into overdrive as in-person events were significantly reduced.

Revenue grew by over 100% compared to approximately 10% the year prior, and results have been strong since. The main caveat was that despite rising sales, costs grew proportionately and they failed to turn a profit. This remains my primary concern, but forecasts predict positive net profit for 2022 and if management can deliver, I might just make a late bid to buy the shares.

Software and sustainability

Another technology company that caught my eye was Aveva Group (LSE: AVV). With sustainability a top priority for every firm looking to both please shareholders and boost long-term prospects, Aveva’s services certainly look optimal for improving efficiency. Oil giants such as BP will be required to improve their operating efficiency and optimise their flexibility when adapting to a world fuelled by alternative energy. Aveva helps them and its other clients do just that.

By providing innovative engineering software, Aveva can reduce system decision-making time across supply chains and improve functional performance. Teamed with revenue growth of 47.9% and a forecast price-to-earnings ratio of only 22.8, relative to its three-year average of 33, I’m giving this company a good look at over the next few months.

Cyber security

The Darktrace (LSE: DARK) share price has plummeted by 55% since its October 2021 highs, and the company now trades at a market capitalisation of only £3bn. As a slightly more risk-averse investor, I do find the valuation slightly intriguing. Despite the lack of earnings and perhaps expensive price of its shares, Darktrace possesses something that is relatively rare for UK-based investors: a chance to invest in a reasonably large firm at the absolute cutting edge of technological advancement.

Darktrace pioneered the integration of AI and cybersecurity, sustaining a competitive advantage over larger peers for quite some time. With renewed cyber security interest as a result of the invasion of Ukraine, I’m going to wait on the sidelines but look slightly closer for now.

Before investing in any of these companies I’m going to see if central banks can restrain inflationary pressures. If they do, I’m interested.

The post 3 of the best technology stocks to buy in April appeared first on The Motley Fool UK.

This move came after Peel Hunt’s downgrade to ‘sell’ with a forecast price of 473p. The broker’s report suggested that the Darktrace share price was overvalued factoring in the revenue figures and low R&D budget. 

For me, historic performance is a crucial indicator of returns in the tech space. And for the past three years, Darktrace has been recording a net loss. But it should be noted that performance has been improving. The recently published half-yearly 2021 report showed an annual growth rate of 40% and 42% growth in its active customer base.

But I still think there are much better offerings in the UK market at the moment. Here are two stocks operating in exciting areas within the tech space that I think are much better growth options than Darktrace.

FTSE 250 star

I think software company Kainos (LSE: KNOS) is often overlooked by investors. The company has excellent revenue figures that have been growing steadily over the last decade.

Kainos provides solutions to improve communication and performance within companies. Given the digital work revolution in the last two years, it’s an area that has gained huge prominence. The company has a large client base including Netflix, Primark, ASOS and the NHS. This shows an established global presence in an incredibly competitive space.

Its shares have risen 62.5% in 2021 and an incredible 863% in the last five years. And I still think there’s a lot of room for growth, given the increasing need for digital workplace solutions.

But it operates in a very congested sector and competes with big names like Amazon Web Services and IBM. Also, given its share price explosion, it’s trading at a forward profit to earnings ratio (P/E) of 60x. But I’m not too bothered by the inflated valuation given the strong sustained financial performance. This is why I think Kainos looks like a much better tech pick for my portfolio today.

Explosive mix of IT and energy

I wrote about tech firm Aveva (LSE:AV) last month because of the its data-driven solutions for companies in the energy sector. Since then, the company has released the Aveva Data Hub, its own Software as a service (Saas) offering. This is part of its cloud computing division that works alongside the data solutions the company offers.

The company recently acquired OSIsoft for £3.8bn to improve its data services for clients like BP, GlaxoSmithKline and EDF. I think the energy sector will see some huge advancements in the coming years as fuel price hikes and coal shortages grip nations worldwide.

There are risks to consider when operating in an emerging area like data analytics. One new gamechanger could banish Aveva to obscurity. And that’s the ruthless world of tech. But the company invests heavily in R&D and I think the probability of this is very low. Compared to Darktrace, Aveva has a long history of excellent returns and an established international clientele which is why I think it’s a better fit for my portfolio.

The post Forget Darktrace’s share price! I’d buy these UK tech stocks instead appeared first on The Motley Fool UK.

Leading the change

Aveva Group (LSE:AVV) has been on my watchlist for a few months now. The software firm first popped up on my radar when I was looking for tech companies with a commitment to environmental conservation. I see this as a big marker for future performance in the tech sector over the next decade.

A large percentage of Aveva’s products focus on data management and cloud computing systems for the energy sector. Data-driven models of energy generation help optimise the supply chain, reducing environmental impact. Its £3.8bn purchase of OSIsoft looks like a move to fortify the data-management wing of the company. Aveva already works with industry leaders like BP, GlaxoSmithKline, and EDF. This is a big win in my books.

A risk is that the current energy and oil crisis could force companies to cut down on operational costs, which could affect Aveva. Another is share price volatility. A leadership shakeup in April and market concerns in September caused shares to slide dramatically. This tells me that traders are highly reactive to news about Aveva stock. Also, the company is set to release a trading update on 28 October. A positive result could cause a jump in share price.

Over the long term, this tech stock looks promising. And although shares look attractive at their current price of 3,690p, I am watching the company to gauge market reaction to the trading update before making an investment.

Booming tech stock

Cerillion (LSE:CER) has had an incredible year in the market with a return of 159% in the last 12 months. For an often overlooked FTSE AIM company, this run is a great sign for investors in the UK tech space.

The company provides customer management and billing systems primarily to the telecom industry. I am excited about recurring revenue in the software space as it denotes customer retention and satisfaction. Cerillion’s recurring revenue rose 26% in the first half (H1) of 2021. The software company has significantly expanded its global presence with an $18.4m agreement with Telesur in Suriname and Latin America. This boosted revenue from new orders by 148% to £23.6m (H12020: £9.5m).

A big concern for my potential investment is the inflated share price at the moment. At 815p, Cerillion shares are trading at a profit-to-earnings (P/E) ratio of 55 times. If a market crash were to happen, investors could flee, opting for more stable and cut-price options. Also, despite an increase in recurring revenue, it is a small percentage of the operation. Any disruption in the current deals could drop revenue in the future.

But, the company is still expanding well and showing signs of becoming a tech stock staple for my long-term portfolio. A trading update is due in November, but I would consider investing in Cerillion today to capitalise on a potential jump in prices next month.

The post UK tech stocks: my top 2 picks for explosive returns appeared first on The Motley Fool UK.

Pushing for diversity

The first company is AVEVA (LSE:AVV). This might come as a slight surprise as an IT software company isn’t the first type of firm that comes to mind when thinking about the top ESG stocks. However, it’s making a push in key areas that really impress me.

For example, it’s pushing for a higher representation of women in the workplace. IT historically has been a male-driven sector, but AVEVA is trying to make a change here. By 2030, it wants 30% of leadership roles and 40% of management roles to be held by women.

Aside from this, the company also indirectly helps ESG pursuits by providing software solutions to better help compute energy efficiency.

In order to be a top ESG stock though, it needs to prove itself from a financial angle too. The share price is up 91% over the past three years, in a steady trend higher. In Q2 of this year, it saw revenue grow by 11%, with growth across all revenue lines.

A risk that I do note is that the company is still bedding in with a new CEO after the shock and sudden departure of previous CEO Craig Hayman at the end of April. He stepped down was for personal reasons, so the change was somewhat quick. Having seen that a change of CEO can make or break a company, I need to see how this situation plays out.

Another top ESG stock

Another company pursuing ESG aims is GlaxoSmithKline (LSE:GSK). The global pharmaceutical giant has shown that it is driven towards making profits, but it also doing well on other fronts. 

For example, each year there is an index published related to access to medicine. It looks at how companies are using research and development and enabling more people and countries to have access to better medicine. In the 2021 index, GSK ranked top, beating several other rivals in the process.

This in itself positions it as a top ESG stock in my eyes. And since the end of 2020, it has also been aiming to have a net zero impact on the climate and net positive impact on nature by 2030. As for this goal, I applaud it but do see this as a potential risk of investing. I feel this is going to be a hard goal to reach. So any underperformance in the years to come could see negative publicity attached to it. This could hamper the share price, even if financial results do well.

As regards performance, the GSK share price is down 7% over the past three years. Yet in the short term, gains of 22% can be seen over the last six months. 

Overall, I think both GSK and AVEVA can be classified as top ESG stocks given the actions taken. I’m considering investing in both in September.

The post 2 top ESG stocks to buy in September appeared first on The Motley Fool UK.

A 2019 star is back?

First up is JD Sports Fashion (LSE:JD). The fashion retailer was a star performer during 2019, but the pandemic saw the share price plummet last spring. It went from 870p to 380p in less than a month, as investors realised that physical stores were unlikely to be generating any revenue due to lockdowns. 

I think the growth stock showed good resilience during last year, as the financial results show. Revenue actually managed to grow slightly from £6.11bn in 2019 to £6.16bn in 2020. Profit did shrink slightly from £438m to £421m, but it was still a good year with everything taken into account.

The pandemic hasn’t dented the ambition of further growth for JD Sports. In recent years it’s pushed forward into the US, with a flagship Time Square store and acquisition of US-based Shoe Palace. I think this international growth should help to push the share price higher once firmly established.

One risk of investing in this growth stock is the supply chain. The fast nature of needed stock, particularly during busy Christmas trading periods, can put the supply chain under pressure. When I add in the impact of customs checks and disruption due to Brexit, any issues here could have a large negative impact on revenue.

A UK tech growth stock

The second stock I’d buy now is AVEVA Group (LSE:AV). Although its origins can be traced back to 1967, it ticks the box for me of being a UK technology growth stock in 2021. The industrial software company has grown over the years naturally and also through several acquisitions.

The one that catches my attention was the £3.8bn purchase of OSIsoft, which was recently completed. This company helps to make software around real-time data management. As such, it has an incredibly wide range of potential commercial uses. I think that this purchase could accelerate growth for AVEVA at a group level.

Over the past year, the share price is up by 20%. I accept that this is relatively modest for a growth stock, but like JD Sports, the pandemic did negatively impact business. However, given the profitability of OSIsoft, the outlook overall is positive in my opinion.

A risk for AVEVA is one that is present for most tech growth stocks. The outperformance tends to come during periods of strong economic growth, when R&D spending is high and demand is strong. The pandemic might have been just a blip, but if we see a recession later this year or beyond then I would expect investors to sell out of AVEVA and into safer stocks such as utilities.

Overall, both JD Sports and AVEVA are two companies I think offer me good value to buy now with £500 each.

The post 2 FTSE 100 growth stocks to buy now with £500 each appeared first on The Motley Fool UK.

I was a bit taken aback when I looked at the results statement though. This was because for the year ending March 31, the company’s statutory results were actually weak. Both revenues and operating profits were down.

Why is the AVEVA share price rising? 

So why the share price jump? I think the increase is down to two reasons. 

One, besides statutory numbers, AVEVA also released combined numbers with OSIsoft, which it acquired last year. These look somewhat better. Revenue is still down, by some 1.4% to be precise. Because AVEVA is a much bigger entity, its revenue decline impacted the wider group’s numbers more than standalone revenue growth for OSIsoft.

But OSIsoft is clearly a much more profitable company than AVEVA. Because of this, combined pre-tax profits for the group have increased by a huge 166%. This is clearly a reason to feel positive about the stock, if you ask me.

Two, AVEVA’s results have been dragged down because of the pandemic’s impact on the first half of the year. But in the second half, it saw double-digit revenue growth. This is encouraging when assessing what lies ahead for the company.

Indeed, the company was positive in its outlook. It said that “ongoing digitalisation of the industrial world continues to drive demand for AVEVA’s software”. It has pointed out positive customer feedback on the combined entity too. And also said that “trading has started well” in the current financial year, even though it is still early days. 

Competitive share price

It looks like there are better days in store for the AVEVA share price. I also like that its price-to-earnings (P/E) ratio is moderate at 30 times, according to my quick calculations after its results.

As a side note though, I would like to point out that there are a bunch of varying P/E numbers available for the company from different sources, which may be confusing. If in doubt, as I was, I would also consider other valuation measures and earlier share price trends, besides making my own estimates. 

What can go wrong

The one red flag for me regarding the AVEVA share price is its recent fluctuations. Pre-pandemic, the stock was broadly on the rise. But last year’s events turned its performance volatile. 

Chances are that as the economy recovers and so does its performance, the AVEVA share price can restart a broadly consistent upward journey. But it does work with clients in cyclical industries, making it more vulnerable to global economic fluctuations. Besides this, it is in a competitive field with a potential to be upset by disruptive technologies. 

My takeaway

Fo now, I am not rushing to buy. I would consider the above factors before buying AVEVA, or at least wait for another set of results before taking a call on it.

The post The AVEVA share price jumps on results. Is it a buy for me? appeared first on The Motley Fool UK.

Which one of these stocks, if any, should I buy today?

The future of mining?

Mining group Glencore (LSE: GLEN) is the FTSE 100’s top riser so far this year, with a gain of 19% since the market closed on New Year’s Eve.

Miners aren’t generally seen as environmentally-friendly businesses. But the reality is that the switch to green energy will require a lot more copper to be dug out of the ground. Battery materials, such as cobalt and nickel, will also be in high demand.

Glencore has regained investor confidence by pledging to phase out coal production and focus on these “transition metals”. The group has also committed to cut its emissions by 40% by 2035, targeting net zero by 2050.

The recent surge in Glencore shares has left the stock trading on 12 times 2021 forecast earnings, with a dividend yield of 3.9%. That doesn’t seem overly expensive, but I’m aware key commodity prices are at multi-year highs at the moment. If prices weaken, Glencore’s profits could be lower than expected this year. Right now, I’d hold onto Glencore shares, but I wouldn’t buy them.

The FTSE 100 riser I’d buy

Next on the list of top risers is oil and gas group BP (LSE: BP), up 18% in 2021. New boss Bernard Looney is keen for the group to be seen as an “integrated energy company,” as it begins a series of changes aimed at cutting emissions and increasing its role in the low-carbon electricity markets.

The oil sector suffered badly last year when prices crashed. Despite recent gains, BP shares are still 40% below the level seen at the start of 2020. As I explained recently, I think that’s probably too cheap.

I expect a strong recovery in energy demand over the next 12 months and believe BP should benefit. In the meantime, the 5% dividend yield means I’ll get paid to hold the shares. I’d buy BP if I didn’t already own enough oil stocks.

Tech superstar?

Industrial software group Aveva (LSE: AVV) is up 17% so far this year. The firm’s shares have now risen by 135% in three years. This strong growth has left the stock trading on 48 times 2021 forecast earnings.

I’ve always found Aveva’s valuation a little hard to understand. I believe it’s a good business with a strong market share in its niche, producing software to help manage complex engineering projects and industrial processes.

However, the stock’s valuation seems to be above historic average levels. Even though 2021 and 2022 forecast earnings are expected to be lower than 2020 earnings. I’m also concerned by the group’s inconsistent profit margins. Aveva is also currently dealing with a large ($5bn) acquisition. This will need to be integrated successfully.

I’d like to own shares of Aveva but, out of all the FTSE 100 risers I’ve considered today, this is is by far the most expensive. It’s too rich for me. For now, I’m staying away.

The post These are the top FTSE 100 risers so far this year. This is the one I’d buy appeared first on The Motley Fool UK.

The frightening drop saw the FTSE 100 software firm lose a total of £1.36bn from its market cap. Outside of a wider market crash, it’s extremely rare to see the share price of stable FTSE 100 companies fall this much.

And with stock markets building intense bullish pressure in recent days, shareholders might be concerned to see such a steep drop.

So what exactly happened?

Making it right(s)

In early November, it announced a £2.84bn rights issue to help it fund a buyout of US software group OSIsoft. 

Three months earlier, AVEVA said it had agreed a total £3.8bn takeover bid for the US real-time data producer. 

CEO Craig Hayman said this at the time the takeover bid was announced: “Combining AVEVA and OSIsoft is yet another significant milestone in our journey to achieving the ambitious growth goals that we have set.”

When companies grow to a multi-billion market cap, they often find it difficult to grow organically. Even quite large increases in sales or profits can make little difference to the share price. So that’s why they tend to take over rival companies. That is, if they are able to find a willing participant.

The firm’s growth has been steady, rather than spectacular, over the past decade. In that time the AVEVA share price has grown by around 105%, from 1,500p to today’s price.  

AVEVA share price down

In order to pay for the massive buyout, AVEVA said it would need to issue 125 million new shares at 2,255p each. Current investors would be allowed to buy seven of these rights issue shares for every nine existing AVEVA shares they own. So if they currently hold 900 of the shares, investors will be entitled to buy 700 new ones.

This complex calculation is similar to that faced by Rolls-Royce shareholders recently. In order to raise £2bn to help shore up its balance sheet, the FTSE 100 defence and engineering firm said it would issue 6.4bn new shares. So, for every three shares an investor held, they could buy 10 more at a cheaper price. 

Heavy discount

The rights issue price of 2,255p came at a 32% discount to what is called the ‘ex-rights issue’ AVEVA share price of 3,338p. That was the value of the share price at the close of business on 5 November 2020, when the plan was announced. 

So these new shares officially started trading on the morning of Wednesday 25 November. And  markets priced it in. That’s the main reason why the share price fell by 20%.  

AVEVA’s largest shareholder is French data-centre provider Schneider Electric. In 2017 the two companies agreed a £3bn merger. Schneider then took a 60% stake in the enlarged business. And it said it would take part in the new rights issue in full.

AVEVA said it would find the rest of the money it needs for the OSIsoft takeover by using cash reserves and by issuing shares to OSIsoft co-owner Estudillo Holdings.

The post Why the AVEVA share price plunged 20% on Wednesday appeared first on The Motley Fool UK.