IT solutions and services

As a quick reminder, Bytes is an IT solutions business providing software, hardware, and cloud services. Its most lucrative segment is software, which it sells to public and private sector clients nationally and internationally.

So what’s happening with the Bytes share price? Well, as I write, the shares are trading for 437p. At this time last year, the shares were trading for 463p, which is a 5% drop over a 12-month period. The shares have dropped 24% from 576p since the beginning of the year to current levels. This has been due to the stock market correction.

The bull and bear case

The Covid-19 pandemic highlighted the need for many companies to review their digital footprint as their employees worked from home. This meant firms like Bytes saw an upturn in fortunes as many customers flocked to buy IT solutions to bolster their digital solutions. The continued adoption of technology should benefit Bytes, which means it could boost performance and investor returns in the future.

As well as a burgeoning market that Bytes could benefit from, it already has a good track record of performance and growth in recent years. I do understand that past performance is not a guarantee of the future however. Looking back, I can see that revenue and profit have increased year on year for the past four years. Many of the best shares to buy now have favourable track records.

Finally, Bytes shares could boost my passive income stream through dividend payments. The shares offer a dividend yield of close to 3%, which is higher than the FTSE 250 average of 2%. It is worth noting that dividends can be cancelled at any time.

So to the bear case then. I notice that Bytes shares look a bit pricey at current levels. The shares are on a price-to-earnings ratio of 33. Is expected growth already priced in or are the shares set to continue to drop further before they fall in line with the company’s true valuation? I will keep an eye on developments.

Next, the IT solutions market is extremely competitive and many players are jostling for the same customers and overall market share. One of its main competitors in this space is Softcat. Losing business and market share could have an impact on Bytes’ performance, returns, and the share price.

My verdict

There is lots I like about Bytes. Currently the rewards do outweigh the risks noted above. Would I class it as one of the best shares to buy and hold for the long term? Perhaps, but only time will truly tell and I will keep a keen eye on developments.

Right now I would happily add a small number of shares to my portfolio and hold on to them. Bytes’ growth trajectory, performance track record, and the fact it pays a dividend helps me make my decision.

The post Is this tech stock one of the best shares to buy now? appeared first on The Motley Fool UK.

Instead of hiding behind the sofa, I’ve been looking for great UK shares to snap up. Here are three I’d be keen to buy if things get really scary. 

CVS Group

Many investors (including myself) are drawn to invest in glitzy themes such as electric cars and robotics. That said, I think there’s one fantastic part of the market that’s easy to overlook, namely pet care. This is why I’m following the movements of CVS Group (LSE: CVSG) very closely. 

CVS provides veterinary services and, based on Thursday’s trading update, is doing very well indeed. Trading over the second half of 2021 was “comfortably in line with full-year expectations” with revenue climbing 11.4% on the previous year.

The mid-cap was also bullish on its outlook, saying that demand remains buoyant due to “increased ownership” and “the humanisation of pets“. 

The shares have fallen almost 11% in 2022, at the time of writing, but still change hands for almost 24 times earnings. That’s a little more than I’d like to pay, hence why I’m keeping my powder dry for now. If the sell-off continues however, I’ll be buying the stock quicker than a cockapoo chases a squirrel.

Bytes Technology

Another UK growth stock I’d have no issue in taking a nibble at eventually is Bytes Technology (LSE: BYIT).

Last year proved to be a hugely successful one for the software, security, and cloud services specialist. Back in October, it revealed increases of 13.7% and 19% in revenue and operating profit respectively in the six months to the end of August. 

As more corporate clients recognise the importance of updating their IT systems, I don’t think this kind of momentum is in danger of reversing soon.   

Stock in Bytes has declined 21% in value so far this year. Like CVS Group however, they still aren’t cheap enough to get me buying just yet (31 times earnings).

Then again, this is not the sort of business that will likely trade on a ‘cheap’ valuation. Returns on capital employed — what a company gets back for the money it puts in — are some of the highest I’ve been able to find.

I think shares will only fall so far before they rebound strongly.

Treatt

A final growth stock that takes my fancy is ingredients supplier Treatt (LSE: TET). This is another company enjoying robust trading. On Friday, it reported making “a good start” to its new financial year.

Notwithstanding this, it did caution investors that pre-tax profit would likely revert to being more weighted to the second half. This is due to the seasonality of drinks consumption in the Northern Hemisphere. 

Since any business needs to keep moving and raising its game, I’m encouraged by Treatt’s ongoing R&D spend. New headquarters are also expected to give the company “substantial extra capacity” to continue growing in the years ahead. As a Foolish investor, that’s the sort of long-term focus I’m drawn to.

Unfortunately, the valuation — an eye-watering 38 times earnings — is still too rich for me.  So while Treatt’s shares are already down 14% this year, I’d prefer to snap up this growth stock when/if markets really start to panic.

The post Stock market crash: 3 UK growth shares I’d buy hand over fist if the selling continues appeared first on The Motley Fool UK.

Deliveroo shares: now delivering

Last month’s upgrade to growth forecasts certainly took me by surprise. With quarterly food orders having rocketed 88%, Deliveroo said its gross transaction value would increase by somewhere between 50% and 60% in 2021. That’s a stonking improvement on previous expectations of between 30% and 40%. 

Elsewhere, the company’s potential withdrawal from Spain makes sense, considering it only generates 2% of its gross sales here and significant investment would be required to improve this. In a highly competitive environment, Deliveroo needs to pick its battles. Based on these developments, the recovery feels justified.

Then again, many of my original concerns haven’t changed. The company doesn’t make a profit and won’t for some time, due to ongoing investment. The share ownership model is still questionable and the debate over the rights of gig workers won’t cease anytime soon.

Whether the above is sufficient to stop the recovery in Deliveroo shares is another thing, of course. A few firms have struggled following their IPO only to go on to deliver stunning gains, despite ongoing concerns (step forward Facebook).

If I were to buy a tech-related stock right now however, it wouldn’t be this one. I think there’s a better option hiding in plain sight in the FTSE 250.

Better tech buy

I doubt Bytes Technology (LSE: BYIT) will be on the lips of many private investors. The  UK-based company has only been listed since December 2020, following a demerger from South Africa-based Altron Group. However, this may be set to change. 

BYIT is a specialist in providing software, security and cloud services. Given that cybersecurity is and will remain hugely important going forward, I think the company could find itself in a sweet spot.

Business is already good. Back in May, the company announced that revenue had grown by 5% to £393.6m in the year to the end of February. Robust spending by customers over the pandemic also allowed BYIT to log record adjusted operating profit of £37.5m. More recently, the business reported strong demand from clients in the public sector.

What’s not to like?

One drawback is the valuation. At almost 36 times forecast earnings, shares are undeniably pricey to acquire. This arguably makes them more susceptible to a big fall if we get some less-than-encouraging news on, say, the global economic recovery (although there’s potential for Deliveroo shares to fall harder, given the aforementioned lack of profitability). Margins in this line of work are also pretty thin and rising costs should be expected following the lifting of restrictions. 

Notwithstanding this, the company has net cash on its balance sheet. Returns on capital are also seriously good. BYIT also benefits from a huge amount of customer loyalty, which may give it the edge over peers.

One to watch

Recent news makes me think I may have been too dismissive of Deliveroo shares. Nevertheless, I’d still be far more comfortable buying stock in a company already making decent profits.

I wouldn’t go ‘all-in’ on BYIT today. However, a small starter position might be in order.  

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