The FTSE SmallCap Index has risen an impressive 13% over the last year. It could be set for further stunning gains too, as investors pile into cheap penny stocks and other undervalued UK shares.

City analysts believe these British small-caps could surge during the next 12 months and are worth considering. The question is: are these forecasts realistic or simply pie in the sky?

Michelmersh Brick

Michelmersh Brick (LSE:MBH) shares slumped into penny share territory towards the back end of 2025. They dropped as sales weakened in key construction markets. Yet brokers are confident the brickmaker will rebound from this point.

Of the four rating the company, each call it a Strong Buy. And the average share price target is 134.5p, up 63% from today’s levels.

I’m not surprised by these bullish forecasts. A lot will depend on the state of the British economy and its impact on the housing market. But I think demand for Michelmersh’s bricks will accelerate as more interest rate cuts and an ultra-competitive mortgage sector boost sales of new homes.

Its low valuation should also support a share price recovery. Its forward price-to-earnings growth (PEG) ratio is 0.5, below the bargain watermark of one.

Topps Tiles

Topps Tiles (LSE:TPT) might also enjoy a share price bump as construction markets improve. The four City brokers who rate the company are confident, drawing up an average 12-month target of 70.6p per share.

That’s up 65% from today’ levels. Three of those four analysts consider the retailer a Strong Buy, with the other ranking it a Hold.

As with Michelmersh, Topps could underperform depending on economic conditions. On top of this, it has significant competitive pressures to overcome. However, work to improve its digital channels and product ranges puts it in great shape to exploit a market recovery.

The penny stock also looks dirt cheap at today’s prices. Its forward PEG ratio is 0.4.

Iomart

Catching a so-called falling knife is a notoriously risky business. But Iomart (LSE:IOM) — whose share price is down 77% over the last year — could be an attractive dip buy for more adventurous investors to consider.

Four brokers currently have ratings on the cloud computing specialist. Two consider it a Strong Buy, with two giving it a Hold rating. But the average price target is far more promising. At 48.8p, this is up 192% from current levels.

So what might spark a strong share price rebound? Over the past year, Iomart has suffered from high customer churn and increased borrowing costs. However, November’s financials showed some green shoots of recovery, with customer renewal rates up in the six months to September and order bookings at record highs.

Like Michelmersh and Topps Tiles, I think there’s a good chance this penny share bounces back in 2026.

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Since they’re usually small, early-stage companies, they prioritise reinvesting any profits back into the business to fuel growth and support operations. So when I saw this small-cap Scottish IT company pop up on my radar yesterday (31 October) with a 6% yield, I had to investigate.

Reaching for the clouds

Glasgow-based iomart Group (LSE: IOM) operates within the cloud services and managed hosting sector. 

Currently, its cloud services segment includes managed hosting, data security and storage solutions, generating over £100m annually. It’s increasingly focused on expanding cloud offerings through acquisitions and partnerships to broaden its reach​. One recent example includes Kookaburra Topco, the holding company of Atech Support, a Microsoft Solutions Partner for mid-sized enterprises.

The focus of the expansion is to attract businesses that want advanced IT systems without building extensive in-house infrastructure. It’s particularly interested in sectors such as healthcare and finance where secure, scalable IT solutions are in high demand​.

In addition to cloud services, it operates an Easyspace segment. This is a smaller part of the business, focused on web hosting services for small businesses and individuals. It brings in about £12m annually​.

Financials

With a market-cap of around £95m, iomart maintains a manageable debt ratio of 19.6%, with short-term assets covering liabilities. However, its earnings have shown a slight decline recently, attributed to competitive pressures and the need for infrastructure investments in a rapidly evolving cloud market​.

In its full-year 2024 results released in August, revenue increased 9.9% while earnings fell 7.9%. Despite the latter’s fall, the results exceeded analyst expectations for the stock.

Its trailing price-to-earnings (P/E) ratio’s attractive, at 13 times earnings. However, this is expected to rise to 20 times as earnings are forecast to decline. Despite these issues, it has a steady cash flow and its plans to expand through acquisitions could position it for a stronger competitive stance in the coming years.

I couldn’t find a reason for this week’s gains but analysts looking at the stock give it an average 12-month price target of £1.47. That would be a massive 97% increase from the current price of £0.74. I think that might be a bit optimistic, but who knows?

Dividends

The key value proposition of iomart is the 6% dividend yield. It has an acceptable if somewhat strained payout ratio of 86% and a fairly good track record of payments. However, while the yield’s increased in the past 10 years, the full-year dividen’s declined from 6p per share to 3.3p.

That’s followed the falling share price, which has dropped 76% in the past five years. In fact, the stock only recently achieved penny stock status after falling below 99p earlier this month.

Having done the research, I’m not convinced iomart’s on track to turn around its earnings just yet. It’s profitable for now but if that changes, the attractive dividend could be cut. I’d need to see more definitive evidence of growth potential before I buy. 

That said, if its recent business acquisitions end up turning the share price around, I’d certainly reconsider the stock.

The post Up 17% in a day with a 6% dividend yield? I just had to investigate this unusual penny stock appeared first on The Motley Fool UK.

Investing earlier in the year means that “you stand to have a bigger ISA pot in the final analysis because your money is at work in the market for longer,” as analysts at AJ Bell recently commented.

With this in mind, here are two dirt-cheap shares I’m looking to buy this month if I have cash to spare.

Iomart Group

A series of impressive tech sector updates makes me believe IT services business Iomart Group (LSE:IOM) could be a top buy.

Why? This Alternative Investment Market (AIM) company is an expert in cloud computing, a segment that is expanding rapidly as remote working becomes increasingly popular.

US internet giant Amazon is the latest tech firm to illustrate the huge potential here. On Thursday it announced a better-than-forecast 16% sales rise at its Amazon Web Services (AWS) division in quarter one.

Okay, sales at AWS are slowing as the global economy cools. Businesses are investing less as a result and this presents a threat to the whole cloud-computing industry.

Yet on balance, Amazon’s numbers aren’t bad in the context of fierce economic headwinds. In fact, business could remain robust as companies try to scale back expenditure on office space.

I also think the threat of a market slowdown is reflected in Iomart’s low share price. Today the business trades on a forward-looking price-to-earnings (P/E) ratio of 18 times. This is far below the prospective average of around 25 times for the broader IT services sector.

Analysts at Grand View Research expect the global cloud sector to expand rapidly through the rest of the decade. They predict a compound annual growth rate of 14.1% between now and 2030.

And as Iomart builds its headcount and targets acquisitions it could be in great shape to grow sales. Last summer the company purchased Concepta to boost its product ranges and its routes to market.

JD Sports Fashion

I’m also considering going bargain shopping at JD Sports Fashion (LSE:JD) in May. I don’t think a forward P/E ratio of 12.2 times reflects its exceptional growth opportunities.

‘Athleisure’ — or sports casual, as it’s more commonly known — has been one of the hottest fashion trends of the new decade. Yet not even manufacturers or retailers in this area are immune to the pressures on consumer spending right now.

Gloomy sales forecasts from industry giants Adidas and Puma in recent weeks illustrate the pressure companies are under. Still, the long-term outlook for the sports casual market remains extremely bright.

Researchers at Mordor Intelligence, for instance, think the athleisure segment will expand at a compound rate of 6.09% between now and 2028.

I think buying JD Sports shares could be a great way for me to capitalise on opportunity. The FTSE 100 firm has terrific brand power, built in part by the exclusive product ranges it sells from major sportswear labels. And it continues to built its global store network and invest in online to exploit the e-commerce boom.

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When economic conditions get tougher, the growth potential of younger, smaller companies can come under severe scrutiny. This can, in turn, lead to painful share price slumps. Slighter businesses can also be more vulnerable to failure during tough times because of their weaker balance sheets.

Yet buying certain early-stage companies can also fire up an investor’s long-term returns. Profits can grow much faster than those over at more mature shares, leading to market-beating capital appreciation.

With some careful research it’s still possible to find top small-cap shares to buy despite the uncertain near-term economic outlook. Here are three I think are great investments today.

Aura Energy

Mining for raw materials is a complex and often expensive business. For Aura Energy (LSE:AURA), earnings could suffer if it encounters problem developing its Tiris uranium-vanadium resource in Mauritania.

Yet I believe the potential benefits of buying this Alternative Investment Market (AIM) share make it an attractive investment. As countries switch away from fossil fuels, demand for nuclear power is tipped to grow strongly, meaning increased demand for radioactive uranium.

Rising energy demand from rapidly-expanding emerging markets also means consumption of the yellow commodity could soar. This is why the International Atomic Energy Agency thinks nuclear capacity will more than double over the next 27 years, to 873 gigawatts electric (GWe).

Demand for Aura Energy’s product could also rise as the building of nuclear submarines ramps up. Saxo Bank said last week that “we expect nuclear and uranium demand to increase” as Australia announced plans to build a fleet of new subs under the AUKUS programme.

Finally, I like Aura Energy because of encouraging drilling work at Tiris. In February, it announced a “major resource upgrade” at the asset, with measured and indicated resources rising by an impressive 52%.

With the business also developing the Häggån uranium project in Sweden I think it could have a bright future.

Iomart Group

IT companies like Iomart Group (LSE:IOM) could endure some earnings turbulence in the near term. Even in our increasingly digitalised world, spending on technology could slip if the global economy remains weak for longer.

Yet as a long-term investor, I believe this small-cap share remains highly attractive. As remote working grows in popularity, I expect demand for its services to steadily rise.

Iomart provides cloud computing platforms that allow workers to perform their daily tasks from anywhere. It is also an expert in cyber security, connectivity and data management, and provides IT consultancy services to businesses.

This broad range of services gives it ample opportunities to generate profits as workplace digitalisation clicks through the gears. Telecoms giant AT&T predicts that the hybrid work model will almost double from 42% of workplaces in 2021 to 81% by next year.

It’s true that Iomart doesn’t carry the financial clout or brand power of industry giants like Microsoft or IBM. But strong recent trading suggests it could still deliver excellent profits growth in spite of high competition.

The post 2 small-cap shares I think could supercharge investor returns! appeared first on The Motley Fool UK.

Rupert Hargreaves: Trifast

Trifast (LSE: TRI) specialises in the design and manufacture of high-quality industrial fastenings. After a slowdown in demand last year, sales have rebounded this year. Revenues in the first half increased 30% compared to 2020 and are now ahead of 2019 levels.

As the global economy continues to rebuild after the pandemic, I think this trend could continue. Management is also looking to complement organic growth with acquisitions.

At the beginning of September, Trifast acquired Falcon in the USA, and management has said that the search for additional acquisitions continues “apace.”

Considering the growth potential, I would buy the stock for my portfolio. Some challenges it could face that may hold back growth include cost and wage inflation pressures.

Rupert Hargreaves does not own shares in Trifast.

Christopher Ruane: Card Factory

As people buy Christmas cards, small-cap stock Card Factory (LSE: CARD) is on my radar. It’s 56% higher than a year ago, but well below its Spring highs.

The company sharply cut its loss in the first half. The Christmas season should be busy. Increasing moves online could help grow sales. The company is cash generative and cut net debt by a third in the first half. But Card Factory remains risky. Its shops can see sales plummet if there are lockdowns, and supply chain inflation could hurt profits.

Christopher Ruane does not own shares in Card Factory.

Roland Head: Spectra Systems

I think that security technology specialist Spectra Systems (LSE: SPSY) could be a quality company at a reasonable price.

Spectra specialises in providing authentication technology for documents, consumer goods and currency. For example, Spectra provides the security features for many countries’ banknotes and the equipment needed to test them.

Banknotes are Spectra’s biggest market, and this is probably the main risk for investors. Use of paper money is falling and the business could struggle to grow.

However, Spectra is diversifying and continues to win new contracts. The group also upgraded its profit guidance for 2021 in October. I think the shares look reasonably priced at current levels. There’s also a tempting 4.7% dividend yield. This is a stock I’d buy today.

Roland Head does not own shares in Spectra Systems.

Andy Ross: finnCap  

Financial company finnCap (LSE: FCAP) is a great small-cap stock in my opinion. Apart from its small market capitalisation, which gives it plenty of headroom to grow into a much larger company, I really like finnCap’s financials. They indicate to me a stock that has serious growth potential. 

The group has a three-year compound annual growth rate (CAGR) for sales of 29%. This is important because, as an investor, I want to know that demand for a company’s products/services is continuously increasing. The operating margin is improving, so all in all it seems like potentially a great time to buy the shares.  

Andy Ross does not own shares in finnCap.

Royston Wild: Science in Sport 

I’d use recent price weakness at Science in Sport (LSE: SIS) as a dip-buying opportunity. The sports nutrition giant has fallen 10% in value over the past month. Demand for the products it makes is rocketing as peoples’ desire to live healthier lifestyles grows and fitness activities become more popular. Science in Sport’s revenues jumped 24% during the six months to June. 

This small cap’s more than doubled in value during the last year. If industry analysts are to be believed there should be plenty of opportunity for Science in Sport’s share price to continue soaring too. Experts at Statista for example think the global sports nutrition market will be worth $35.4bn by 2026. That’s up significantly from the $16.5bn it was valued at last year. Through its popular products I think the business should make big profits in this favourable landscape.  

Royston Wild does not own shares in Science in Sport.

Zaven Boyrazian: iomart

iomart (LSE:lOM) is a cloud-computing business trying to take on industry giants like Amazon, Alphabet, and Microsoft. That’s quite a tough bunch of competitors, so it’s not surprising to see revenue growth struggle. However, management has since begun pursuing a niche in the hybrid-cloud market through bolt-on acquisitions.

It will take some time before this new strategy starts yielding results. However, iomart continues to be supported by fairly impressive cashflows courtesy of its high customer retention and 93% recurring revenue.

There is obviously no guarantee of success. And using an acquisitive approach has led to an increased debt position that adds more risk. But given the potentially explosive returns of becoming a new leader in cloud computing, I think the risk is worth the reward.

Zaven Boyrazian does not own shares in iomart, Amazon, Alphabet or Microsoft.

Paul Summers: Bioventix

Although still far from being cheap, I think shares in biotech firm Bioventix (LSE: BVXP) are starting to look attractive. Stock in the small-cap antibodies supplier has fallen 20% in value in 2021 so far. 

At least some of this selling pressure has been due to hospitals continuing to prioritise dealing with the pandemic over diagnosing people for other things. To make matters worse, understandably cautious patients aren’t even reporting symptoms to healthcare professionals. As a result, Bioventix’s main business has been suffering.

I reckon this might be a great contrarian opportunity. BVXP’s returns on capital and margins are some of the best on the market. The balance sheet also looks sound. Any indication that Covid-19 is being beaten back and the shares could rally. 

Paul Summers has no position in Bioventix

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There are undoubtedly countless reasons for this lacklustre performance. However, in my experience, such events can be opportunities to buy businesses at better prices. After all, stock prices might be idle, but the underlying companies are still moving forward (in some cases anyway). With that in mind, here are two UK shares I’ve got my eye on this month as potential new additions to my portfolio.

A rising chocolate empire

One UK share that has been an impressive story to watch recently is Hotel Chocolat (LSE:HOTC). The firm is a vertically integrated premium chocolatier. Using cocoa grown on its own plantations in St. Lucia, Hotel Chocolat designs and producers high-quality (and in my opinion, rather tasty) chocolate treats, as well as other cocoa-based products.

For years, the business has been developing itself into a multi-channel retailer by launching new partnerships with Amazon and Ocado, as well as its own online store. At the same time, its loyalty programme, VIP.ME, has grown to over 2.1 million members. So, when its stores were forced to close for prolonged periods during lockdowns that included Easter and Mother’s Day, revenue continued to grow regardless. 

With the vaccine rollout progressing relatively quickly and the UK slowly returning to normality, I would expect any operational disruptions to cease. And with it, I expect even more growth. That’s why I’m tempted to add this company to my portfolio. However there are, as always, some risks.

The business is heavily dependent on its St. Lucian cocoa supply chain. Transporting this cargo across the Atlantic is an expensive and lengthy process that can easily be interrupted by something as unpredictable as the weather. Such disruptions could lead to product shortages, which might push customers elsewhere to get their chocolate fix.

One UK share leading the digital revolution

I think it’s fair to say that the pandemic has created quite a substantial number of operational problems. However, it has also drastically accelerated the adoption of digital transformation and remote working. These technologies are highly dependent on cloud computing, which is excellent news for Iomart (LSE:IOM).

A recent survey by the BBC interviewed 50 of the UK’s biggest employers about their plans to bring workers back to the office. Some 47 of these businesses stated they don’t plan to bring staff back to the office full-time. In other words, it doesn’t look like the current digital transformation is going to end any time soon. And with budgets beginning to open up for further investment, Iomart could be adding more clients to its roster. Needless to say, this looks like a tempting opportunity for my growth portfolio.

But, it’s worth remembering that the cloud computing industry is filled with fierce competition. This UK share has to face up against the likes of Amazon Webservices as well as Microsoft Azure. Needless to say, that’s a tough challenge. Suppose the business can’t deliver the same quality and reliability of service? In that case, it may struggle to retain and attract new customers.

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Extreme share price turbulence due to social, economic or political events is nothing new. Yet history shows us that UK share prices always roar back following such crises. This is why the average long-term investor enjoys a handsome (if not guaranteed) average annual return of 8%.

I’ve already invested in Keywords Studios in recent days. Here are three more of what I feel are some of the best stocks to buy too. Like other UK shares I own, if I had a lump sum to invest, I’d buy them with a view to holding them for at least a decade.

On Cloud 9

I believe that the rise of home-working in the wake of last year’s Covid-19 outbreak presents good investment opportunities. And I’d do this by investing in Iomart Group (LSE: IOM). This a UK share that offers cloud computing services through its network of data centres spanning Europe, North America and Asia-Pacific.

A new BBC survey reveals how companies like Iomart could be some of the best stocks to buy to ride the digital revolution. More than 80% of the firms that were surveyed said they would “embrace a mix of home and office working”, the broadcaster said. Employees of these firms would be “encouraged to work from home two to three days a week”, the BBC added. The 50 companies that were questioned employ a total of 1.1m people, a figure that illustrates the huge revenues potential for companies that make remote working possible.

Bear in mind though, Iomart has some very big industry rivals. This means that it faces significant pressures when it comes to both product price and quality. The cloud computing market is expanding rapidly, but this UK share isn’t totally without risk.

One of the best property stocks to buy?

I also believe that Grainger (LSE: GRI) could be another top UK share to buy right now. I certainly believe that the professional landlord is one of the best property stocks to buy as rents in Britain go from strength to strength.

A report by estate agency Savills suggests that average rents will rise 17% during the five years to 2025. It’s a prediction that reflects the expectation that tenant demand should continue outpacing property supply, exacerbated by the large number of buy-to-let landlords leaving the sector due to increasing red tape and higher tax charges.

It’s true that changes to the regulation of the rentals market could hit Grainger’s profits further down the line. But right now, I think it’s a great UK share to buy for the next decade.

The post 2 of the best stocks to buy with £10k and 10 years to wait appeared first on The Motley Fool UK.

I don’t find that surprising. iomart’s services enable people to work from home. And that was one of the few big growth stories of 2020. But, later in the year, iomart shares started to fall back again. The change occurred just before the markets in general started to recover on the back of positive vaccine progress.

The share price slide has accelerated this year, and in the past month we’ve seen an 11% drop. Cumulatively, that’s a 20% fall over the past two years, for what was looking like a long-term growth story.

Are these events related? Did investors buy when the prospects for home working looked strongest? And are they selling now we’re all closer to getting back to conventional work practices? That does seem likely to me.

The financial situation

We’re on for a drop in iomart’s earnings for 2020-21. Analysts do, however, expect longer-term earnings growth and have a rise pencilled in for the following year.

The most recent update from the company came earlier in April. For the full year, iomart expects to report pretty much unchanged revenue — approximately £112m, compared to £112.6m a year previously. Earnings are set to dip, though. The firm says adjusted EBITDA should fall 4.6% to approximately £41.5m. And adjusted pre-tax profit should be down 12% to around £20m.

It spoke of “a drop in non-recurring hardware reselling activities as customers delayed investment decisions“. And that’s put a squeeze on margins. In the current economic circumstances, I’m not surprised. Just about every company I’ve been looking at over the past year has been cutting costs and delaying expenditure.

But cash flow looks strong. The year-end cash position strengthened from £15.5m at 31 March 2020, to approximately £23m. iomart has “maintained its sales team throughout the Covid-19 pandemic in order to position the company optimally once business confidence returns“. And it has not used any furlough support.

Should I buy iomart shares?

So what do I think about investing in iomart at today’s price? I’m torn, as I always am with growth stocks around this stage of their development. I see two downside threats, at least for the next year or two. One is perhaps more obvious, that the economic effects of the pandemic could go on longer than we might think. While any boost for home working is good, companies reining in their spending on infrastructure is not.

I also think we could be seeing a typical cooling off that happens with so many growth stocks. All we need is a slowdown in earnings progress, and many investors will sell, hold back, and wait for growth to reestablish itself.

But looking at the wider picture, I reckon the lockdowns have helped accelerate the trend in remote and flexible working that was always going to happen. And that should be a boon for companies like iomart. It’s on my list of potential long-term buys.

The post The iomart share price recovery is faltering. I think I’m seeing a buying opportunity appeared first on The Motley Fool UK.

Take iomart Group (LSE: IOM) as an example. This IT services business provides a broad range of cloud-computing solutions that enables people to work from anywhere. And so it stands to make big profits from the growth of flexible working following coronavirus-related lockdowns in 2020 and 2021.

A recent survey of chief information offers by Enterprise Technology Research suggests that the number of remote workers around the globe will more than double in 2021. It indicates that around 34.4% of respondents’ workforces will work remotely this year. That’s up from 16.4% before the pandemic.

Profits to rebound?

There are reasons why the spike in remote working could run out of steam, however. There’s been a rise in cyber crime during Covid-19, a continuation of which could discourage companies from investing in their cloud computing capabilities. Another is the fact that many firms could roll back their flexible working practices if it’s deemed inefficient or if other employee-related issues emerge.

City analysts reckon iomart’s earnings will slip 10% in this fiscal year (ending March 2021). But they reckon annual earnings will rebound 7% in financial 2022. Earnings can exceed this, of course. But they can also fall short, depending on trading conditions. Today this UK share trades on a forward price-to-earnings (P/E) ratio of 24 times. It’s an elevated reading that could prompt a sharp share price reversal if business performance deteriorates.

Another strong UK share

Another consequence of the pandemic is that animal adoption rates have gone through the roof. Many breeders and animal shelters now have colossal waiting lists as people have sought companionship during the pandemic. That aforementioned growth of homeworking has also boosted pet numbers as people who otherwise wouldn’t have taken on an animal companion have gone for it.

All this bodes well for sellers of pet products and services like Pets At Home (LSE: PETS). This particular UK share is the one-stop-shop for all of a pet’s needs. It provides everything from food to pet litter, toys and kennels, all the way through to supplying veterinary services.

There are a couple of threats hanging over UK animalcare shares like Pets At Home. Firstly, a tough economic recovery could cause shoppers to scale back non-essential purchases for their furry friends. The possible end of Covid-19 lockdowns could also prompt a sharp fall in pet demand from rescue centres and the like.

City brokers reckon Pets at Home’s earnings will drop 7% in the financial year to March 2021. But they expect them to bounce by 39% in fiscal 2022. This leaves the company trading on a very-high forward P/E ratio of 38 times, putting it in the same danger of a share price fall as iomart. I still think this is a top UK share to buy today, though, given the surge in animalcare spending even before Covid-19 kicked off.

The post 2 UK shares I think will emerge from Covid-19 in great shape appeared first on The Motley Fool UK.

The sudden surge in user activity has drastically increased the need for datacentres and server farm capacity to maintain the increased traffic on their cloud platforms.

iomart Group (LSE:IOM) owns and operate datacentres around the world as well as a private fibre optic network. The firm’s infrastructure has allowed it to gain a reputation for secure, high-quality data services for businesses – both public and private.

It’s even attracted several UK government agencies to its network.

The cloud computing stock has a revenue stream deriving from two segments: Cloud Services and Easyspace.

The Cloud Services segment is the larger of the two and generated £99.8m revenue in 2020. It provides customers with a fully managed and bespoke cloud infrastructure as well as dedicated servers. Put simply, clients can integrate and run their platforms seamlessly through iomart without any disruptions while having 24/7 on-site support should a problem occur.

The Easyspace segment provides a range of products – such as domain names and email services – to the small & medium-sized enterprise (SME) market space.

Both the top and bottom line have been consistently increasing year-on-year (YoY).

While an average 10% YoY growth in revenue is certainly not ground-breaking, almost 90% of it has been generated from recurring sources. This has helped keep operational costs low, resulting in a handsome operating margin.

Despite this increased performance and ideal revenue source, the operating margin has somewhat declined since 2016.

However, the cause appears to be rooted from engaging in bolt-on acquisitions as the firm expands. Most recently, the successful integration of Bytemark and LDeX to its portfolio, adding new customers and complementary datacentre locations.

With the bulk of the revenue being generated from within the UK and online operations, the direct effects of Brexit remain negligible. Should the need for an EU trading relationship arise, iomart has an established subsidiary in the Republic of Ireland from where it can trade seamlessly.

There are some risks to be aware of. The cloud computing stock has managed to thwart competitors thanks to its high standing reputation for excellence. If this reputation were to be compromised by something such as a security breach, it would have devastating effects on the trust between the firm and its customers.

Furthermore, while the Cloud Services segment saw organic growth of 6% in 2020 – up from 2% in 2019 – the firm still relies heavily on acquisitive revenue growth.

To date, I believe the management team have proven capable in identifying acquisition targets to create value for shareholders. However, if that were to change, it could introduce several disruptions to the business.

2020 marks the twelfth consecutive year of growth for the cloud computing stock. With organic growth beginning to become the dominant driving force, I think investors can reap enormous long term gains as cloud-based innovations continue to thrive.

The post I think this cloud computing stock will thrive in the next lockdown appeared first on The Motley Fool UK.