Pan African Resources

Buying gold stocks could be a good idea as prices of the yellow metal soars. Pan African Resources (LSE:PAF) is one mining stock on my radar due to its incredible value.

The AIM share trades on a forward P/E ratio of just five times. Meanwhile its corresponding dividend yield sits at a juicy 5.5%.

The price of bullion has in recent hours rocketed back through the $2,000 per ounce level. With this key technical level breached — and worries continuing to mount over US and European banks — a surge to new record highs could be imminent.

Having exposure to gold can be a good idea for investors at any time, in fact. It can protect an individual’s wealth when crises unexpectedly break and prices of riskier assets like UK shares tumble.

Owing gold-producing stocks can be turbulent business sometimes. Production troubles can be commonplace and earnings can regularly take a big hit. Indeed, power supply problems have hit Pan African Resources’ own output in recent months.

Yet I believe the possible benefits of buying this South African miner outweigh this risk. It has a number of exciting growth projects in its portfolio. And last week it sealed funding for the construction of the Mintails gold asset, a project the business said will “significantly” contribute to group production over the next two decades.

Kape Technologies

UK shares that specialise in IT services lack the scale and the consumer recognition of their US counterparts. Kape Technologies (LSE:KAPE), for example, is a small fish compared to digital security rivals including NortonLifeLock, IBM, and Microsoft.

Yet the rate at which the cyber protection sector is growing still makes British companies worth serious attention in my book. Analysts at McKinsey & Company think the global market could eventually be worth between a staggering $1.5trn to $2trn, up significantly from $150bn today.

Recent impressive trading at Kape illustrates the massive opportunity here. The number of paying customers on its books soared 12% in 2022 to 7.4m. This helped revenues soar to a better-than-expected $623m from $230.7m a year earlier.

Recent successes explain why the IT experts have been the subject of a takeover bid by Unikmind, a company owned by majority shareholder Teddy Sagi. The offer of 285p per share was rejected but a fresh approach could be just a matter of time.

City analysts expect Kape’s strong record of annual earnings growth to keep rolling on in 2023. This leaves the business trading on a rock-bottom forward P/E ratio of just 5.5 times.

At these levels I think the AIM company could be too cheap to miss. In fact if I have spare cash to invest I’ll look to add it to my own UK shares portfolio.

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Digital dynamos

There’s a vast collection of cybersecurity companies investors can choose from on the London Stock Exchange. And a quick look at broker forecasts showcases how much potential these growth stocks have.

Take Kape Technologies (LSE: KAPE), for instance. City analysts think that earnings here will jump 57% year on year in 2022. This is particularly impressive given the rising prospect of a global recession.

Kape builds antivirus software that currently protects over 7m global users from malicious attacks. This is a small number compared to industry heavyweights like Microsoft and FTSE 100-quoted Avast. But sales are growing at an astonishing speed.

Revenues roared to $301.6m in the first half of 2022, up 216% year on year (or 19% on a pro-forma basis). Encouragingly almost nine-tenths of sales were recurring in nature, giving the company excellent earnings visibility.

Watch the unicorns

A report by Atlas VPN illustrates how rapidly the cybersecurity industry is growing. It says that the number of ‘unicorns’ — the name given to private new businesses valued at $1bn or above — is growing “at an unprecedented rate.” This is clearly a good sign for the entire industry.

Despite its impressive sales momentum Kape Technologies shares trade exceptionally cheaply. Today the tech business trades on a forward price-to-earnings growth (PEG) ratio of 0.2. Any reading below 1 suggests that a stock could be undervalued.

Remember, though, that cybersecurity specialists like this operate in an unforgiving industry. A high-profile failure of their systems could spell catastrophe for future earnings.

Another bargain growth share

Clarkson (LSE: CKN) is one of the world’s largest providers of shipbroking services. So in theory it is in danger of seeing profits fall as the global economy cools and seaborne freight volumes slow.

But despite the deteriorating macroeconomic outlook City analysts continue upgrading their earnings forecasts for the business. They now think earnings will rise 25% year on year in 2022 amid predictions of further solid revenue growth.

There simply isn’t enough shipping capacity to go around. And so shipping rates continue to rise, boosting profits at businesses like Clarkson.

The Xeneta Shipping Index, for example, shows that long-term freight rates on container ships are still rising strongly. These were up 4.1% month on month in August, or 121.2% on an annual basis.

Inadequate shipbuilding levels in recent years have left a huge shortage of available vessels. And with a recession looming new ship orders look set to slip again, worsening the supply/demand imbalance.

It’s why Clarkson — which enjoyed revenue growth of 40% in the first half — has commented that “the outlook for the business remains strong.”

I think recent share price weakness here provides an excellent dip buying opportunity. Today Clarkson shares trade on a PEG ratio of just 0.6. Like Kape Technologies, I think this is one of the best growth stocks out there for value investors.

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Bringing the house down

I think getting exposure to the residential rentals market is a great investment idea. And I’d do this by buying shares in Grainger (LSE: GRI), the country’s largest private-sector landlord.

Rents are rocketing because of a chronic lack of available properties. It’s a theme that’s been exacerbated by rising buy-to-let costs that have prompted an exodus of landlords in recent years. I fully expect this shortfall to continue for several years at least too, as rental home supply will likely fail to keep up with demand growth.

According to the Deposit Protection Service, average rents rose to £849 in the first quarter. This was up 6.1% on an annualised basis. Tenant costs increased in all regions, with 10 of the 12 regions recording growth above 4%.

Rents set to keep soaring

The problem with investing in Grainger shares is that they aren’t cheap. Today, the company trades on a forward price-to-earnings (P/E) ratio of 35.4 times.

Any sort of premium valuation leaves a UK share in danger of a price correction if newsflow begins to sour. In the case of Grainger this could include rising costs or problems with meeting its construction targets.

However, it’s my opinion that Grainger merits a large earnings multiple. The outlook for the British rentals sector remains ultra-bright and is likely to remain so for some time. Analysts at Savills for example have predicted rents in the UK will rise almost 20% between now and 2026.

A top cybersecurity stock

I believe that buying some UK technology and IT services shares could be a good idea as the digital revolution clicks through the gears. One way I’d look to do this is by buying Kape Technologies (LSE: KAPE) for my stocks portfolio.

This particular company is an expert in the field of digital security and privacy. It makes antivirus software which battle cyber attacks, for example, and services which protect users’ anonymity when going online.

The cyber security market alone is tipped to grow strongly this decade. Analysts at Statista, for instance, think the industry will be worth $211.7bn by 2026. That’s up significantly from the $146.3bn it’s tipped to be worth this year.

Crusading Kape

The market opportunity for Kape Technologies is huge. But there’s no guarantee it will deliver monster profits growth in the years ahead. For example, the company is coming up against the might of industry heavyweights such as Norton and Microsoft.

Still, it’s my opinion that the size of the market opportunity — and the excellent progress Kape is making right now — makes the UK share a top stock to buy today. Kape saw revenues leap 20.7% (on a pro-forma basis) in 2021, blasting past even its own expectations.

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A top counter-cyclical share to buy today

I believe Begbies Traynor Group (LSE: BEG) shares look too cheap for me to miss. The insolvency and administration practitioner trades on a forward price-to-earnings growth (PEG) ratio of 0.5 for this financial year (to April). This is comfortably inside the benchmark of 1 and below that suggests a stock is undervalued.

Earnings at Begbies Traynor have been growing by solid double digits each year for around half a decade now. This is thanks in large part to the profits-boosting acquisitions it’s been making in recent times.

With the UK economy slowing, and rocketing inflation putting businesses under intensifying pressure, I expect profits to keep growing strongly too as demand for its services should inevitably pick up. This is a view shared by City analysts who reckon full-year profits will grow 23% and 10% this year and next respectively.

Insolvency cases in Britain are rising sharply as Covid-19 furlough schemes have been withdrawn. The numbers look set to grow strongly in the spring and beyond too, as inflationary pressures worsen and the removal of final government financial support programmes this month.

However, Begbies Traynor’s profits could significantly suffer when economic conditions improve. But at current prices, I think it remains a top cheap UK share to buy.

A dirt-cheap stock for the digital revolution

Kape Technologies (LSE: KAPE) might not have the financial clout or the brand recognition of US cyber security giants like Microsoft or McAfee, to name just a couple of its rivals. And it is facing the threat of other major tech players like Google entering the fray too. But at current prices, I still think this smaller player could be worth the risk. Today, Kape trades on a forward PEG ratio of 0.2.

The rapidly-growing cyber security industry moved up another gear during the pandemic as both homeworking and e-commerce took off. It’s a sector that looks set to keep growing rapidly as well, giving Kape the chance to deliver more solid earnings growth, despite that competitive threat. City brokers think the firm’s earnings will surge 57% in 2022 and by an extra 11% in 2023.

It’s perhaps no surprise that forecasters are so bullish given the constant stream of news concerning cyber attacks. In recent days, Toyota was forced to shutter 14 of its factories following an attack on its systems. The British government too announced steps to make internet providers bulk up their security to protect users.

Investment in internet security is set to soar across the globe as cyber warfare from independent hackers and rogue states increases. And I think Kape could be a great cheap share to buy in this environment.

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Reflecting this fertile environment Kape Technologies’ share price has risen a handsome 61% during the past 12 months. Yet the tech firm has been on the backfoot more recently and, at 318p per share, it was recently trading at a hefty discount to December’s record of 455p. I think this represents a terrific buying opportunity.

Cyber warfare steps up

I’m not just thinking Kape Technologies will thrive as flexible working methods become commonplace and online shopping expands strongly. A steady rise in state-sponsored cyber attacks is another reason why I expect sales of its software to soar.

It’s not just governments and critical infrastructure that are in the crosshairs of such attacks. This week Britain’s National Cyber Security Centre urged all organisations to bolster their cyber defences following the crisis in Eastern Europe, citing a “historical pattern of cyber attacks on Ukraine with international consequences.”  

The increasingly turbulent geopolitical landscape — and the massive sums countries are now spending on their cyber capabilities — means that the internet is likely to become a much more dangerous place for organisations. All this means that demand for Kape Technologies’ products could continue growing strongly. 

Expanding for growth

It’s true that Kape faces massive competition from major US software players like Microsoft and NortonLifeLock, to name just a couple. But I like the steps the business is taking to expand its services and take the fight to its rivals.

Last March the business completed the transformative acquisition of information provider Webselenese for a shade under $150m. This business helps consumers navigate the complex world of web security with its product comparison websites and has a global readership that exceeds 100m.

And in December Kape acquired industry rival ExpressVPN for a cool $936m. This move gives the company considerably more scale (with some 6.5m paying subscribers) and exceptional cross-selling opportunities. It also brings one of the industry’s biggest names under Kape’s wing.

Pleasingly Kape’s excellent cash generation means that it should have the capability to continue investing for growth through more acquisitions as well. Latest numbers on this front showed adjusted operating cash flow leapt 66% year-on-year to $14.6m between January and June 2021.

A top UK share to buy today

As I said at the top, the share price has fallen sharply in 2022. And it’s my opinion that this could make the tech giant too cheap to miss.

City analysts think Kape’s earnings will jump 57% in 2022. This leaves the software giant trading on a price-to-earnings growth (PEG) ratio of 0.2. Any reading below 1 suggests that a stock could be undervalued by the market, according to investing theory. This is a cheap UK share I think would be a brilliant buy for me right now.

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Cyber security specialist

Cyber security is a major concern for businesses and consumers alike as the digital revolution continues to speed up, driven by the pandemic. Kape Technologies is a software business specialising in cyber security software solutions. It designs and sells its own proprietary tech through a number of its own brands. Kape possesses an international reach with operations in 11 countries through its 750 employees.

As I write, the shares are trading for 400p. At this time last year, the shares were trading for 195p, which equates to a 105% return over a 12-month period. Looking back even further, five years ago the shares were trading as a penny stock for 48p. There aren’t many FTSE stocks that have returned over 700% across a five-year period.

For and against buying shares

FOR: Kape has performed well consistently for a number of years through organic growth and key acquisitions. Reviewing past performance, I can see revenue and gross profit has increased year on year for the past four years. Of course, past performance is not a guarantee of the future. Kape’s most recent update, an interim report released in October for the six months ended 30 June was positive too. I can see that overall revenue, recurring revenue, operating profit, and cash generation all increased compared to the same period last year. It also completed a key acquisition of Webselense for close to $150m to enhance its offering.

AGAINST: The tech and cyber security market is saturated and extremely competitive. Many of the firms in this space that do well have a rich history of performance and brand recognition. There are bigger names with better reach in this space than Kape, which could affect customer numbers and in turn, performance and shareholder returns.

FOR: I like when a firm makes acquisitions to enhance its offering and beat off competition. Kape has a consistent history of doing this. I particularly liked its most recent addition to the Kape umbrella, ExpressVPN, one of the best known VPN services around. This deal was completed at the end of last year and gained Kape millions more customers and lots of revenue.

AGAINST: Despite my personal, bullish attitude towards acquisitions, there is always the risk that they don’t work out. Kape, like any firm completing acquisitions, could end up overpaying for a business or the business may not perform as expected. This can affect the balance sheet and potential shareholder returns too.

A FTSE stock I would buy

Overall, I really like Kape Technologies and I would add the shares to my holdings at current levels. It has grown at a rapid rate in a burgeoning tech market despite some heavy hitters out there like Avast and McAfee. Recent and past performance has been excellent and it continues to acquire excellent businesses to enhance its offering.

I expect the cyber security market to continue growing. I think Kape should command a slice of this market and perform well for my portfolio in the long term.

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Riding the cycling revolution

The last couple of years have been bittersweet for car parts and bicycle retailer Halfords Group (LSE: HFD). Sales of its bikes rocketed as Covid-19 gym lockdowns prompted people to find other ways to get fit. However, severe supply chain problems meant the business hasn’t been able to capitalise on this trend to its fullest. This is an obstacle that looks set to continue too.

As a long-term investor, I’m tempted to buy Halfords shares. Britain has fallen back in love with cycling and rising investment in cycle infrastructure should continue supporting strong demand for the retailer’s products. Rising environmental awareness should also help sales as more people are expected to hop on their bikes and leave the car at home. Today, this UK share trades on a forward price-to-earnings (P/E) ratio of 10.4 times.

Lok’N load

The self-storage market in the UK is booming. It’s why analysts think earnings at Lok’N Store Group (LSE: LOK) will rocket 188% in this financial year (to June 2022). Demand for space is rising for a number of factors, such as large numbers of people moving house and embarking on home renovations. The growth of e-commerce is fuelling occupancy rates too, as well as supply chain issues encouraging retailers to boost their stock levels.

Based on current earnings forecasts Lok’N Store trades on a forward price-to-earnings growth (PEG) ratio of 0.2. This is comfortably below the benchmark of 1 that suggests a stock could be undervalued. I’d buy the business at these levels even though demand for its storage units could suffer if consumer spending power slips in 2022.

Head to the Kape!

I’d also buy Kape Technologies (LSE: KAPE) to try and make a stack of cash as the cybercrime problems grow. This UK share creates products that keep users’ data secure and private such as VPN software and antivirus programmes. This is a highly competitive environment and success is by no means guaranteed. However, I’m impressed by the breakneck progress Kape’s making in an industry dominated by big hitters like Avast and McAfee.

In its latest financial update, Kape said it expects full-year revenues for 2021 to hit “the upper end” of a forecasted range of $197m-$202m. By comparison, the tech titan punched sales of $122.2m in 2020 and $66.1m the year before that.

Kape’s progress is probably no surprise given the rate at which the cybersecurity market is growing. Researchers at Mordor Intelligence think the industry will be worth $352.5bn by 2026. That compares with the $156.2bn it was valued at last year. I don’t think Kape Technologies’ low PEG ratio of 0.2 reflects its exceptional growth opportunities this decade.

The post 3 dirt-cheap UK shares to buy in 2022! appeared first on The Motley Fool UK.

Yet, for my money, it still appears to offer excellent value. City analysts think earnings here will rocket 30% this fiscal year. Consequently, this cheap UK share trades on a forward PEG ratio of just 0.4.

iEnergizer provides a broad range of services, from human resources and quality assurance support to market research and sales assistance, to businesses. Its expertise spans a broad range of industries too, such as healthcare, financial services, gaming and publishing. And last week, it said that sales had soared 35.1% year-on-year in the six months to September (to $121.9m).

Critically service sales sat its core Business Process Outsource rocketed almost 52% in the period, to $83.5m. This was driven by an influx of business from both new and existing customers.

What I like about iEnergizer is the wide selection of services it offers across a variety of very different industries. And it offers them across six continents too. This helps give it exceptional solidity and protection from weakness in any one industry or territory.

5.9% dividend yields!

I don’t think iEnergizer offers great value from just an earnings perspective either. Its excellent defensive qualities give it the strength and the confidence to pay out big dividends too. This means that for this year it carries a mighty 5.9%.

Fraud is a problem for companies like this, and in particular the threat of payments made to fictitious employees. It’s a key issue that was picked up in iEnergizer’s recent audit, in fact. Still, it’s my opinion that the company’s qualities could more than offset this risk, a problem that’s also more than reflected in its cheap valuation.

Another cheap share I’m watching closely

Kape Technologies (LSE: KAPE) is another dirt-cheap UK share I’m thinking of snapping up. Sure, it doesn’t offer a dividend. But I think forward price-to-earnings growth (PEG) ratio of 0.4 could be too good to miss. Like iEnergizer, its rating below 1 suggests it could be undervalued by the market.

Kape Technologies is a tech company I think will thrive as the problem of cybercrime grows. Businesses are investing vast sums in software to protect their operations, a phenomenon which blew underlying organic revenues at Kape 27% higher in the six months to June.

I also like this UK share because its excellent cash generation is allowing it to execute shrewd sales-boosting acquisitions. In September, for example, the firm splashed out a cool $936m on the purchase of ExpressVPN.

An appetite for acquisitions can create huge risks to a company. These can include unexpected costs, overestimating synergies and disappointing revenues. However, its my opinion that this risk is more than offset by the possible rewards Kape Technologies could reap as the cybersecurity market swells. 

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The company in question is digital privacy specialist Kape Technologies (LSE: KAPE). Sales doubled at this £800m firm last year. A near-$1bn acquisition this week has also attracted my attention. Should I buy Kape now?

What’s the big deal?

Kape specialises in digital privacy and security products such as VPN software and antivirus systems. The group has 2.7m paying customers, spread across brands such as Private Internet Access (PIA), Cyber Ghost VPN and Intego Antivirus. VPN services encrypt users’ internet connections, so they can’t be spied on or monitored.

A $936m deal announced on Monday will see Kape acquire ExpressVPN, which has more than 3m customers. This will double Kape’s customer base overnight and leave the group well-positioned to become a leading player in the VPN space.

Based on last year’s results, ExpressVPN will add $279m of revenue to Kape’s group results, with adjusted EBITDA profits of $75m. The equivalent figures for Kape last year were revenue of $122m and adjusted EBITDA of $39m.

It’s clear that deal should transform it into a much bigger business.

A fast-growing tech stock

I can see plenty to like about Kape shares. Ahead of this week’s news, the group’s sales were expected to rise by 60% to $200m this year. Adjusted EBITDA was expected to double to $73m-$76m.

This guidance priced the stock at 18 times forecast earnings, which doesn’t seem excessive to me. The acquisition will complicate its accounting for this year, but management has given updated guidance for 2021 revenue of $610m-$624m and pro forma adjusted EBITDA of $166m-$172m.

I estimate that Kape will issue around 145m new shares to help fund the acquisition. Management believes that the extra profit generated by ExpressVPN will cancel out this dilution to existing shareholders.

Indeed, the company’s guidance is that 2022 earnings per share should be around 28% higher than they would have been without ExpressVPN.

I’d buy – but carefully

If it can maintain its recent rate of growth, then I think this UK tech stock could be good value at current levels.

However, the situation isn’t completely without risk. A fair amount of growth is already priced into Kape’s share price, in my view. Big acquisitions like this don’t always work out well — if future growth disappoints, then the shares could slump.

Another point worth noting is that Kape has a majority shareholder who can effectively control the business. Israeli billionaire Teddy Sagi — who founded FTSE 250 gambling software company Playtech — owns 60% of Kape through his company Unikmind Holdings.

In a situation like this, external shareholders are basically along for the ride — they will never be able to outvote Sagi. This isn’t necessarily a problem, especially as he has a strong track record. But it’s worth remembering.

On balance, I’d be happy to buy some Kape shares at current levels. But I’d only make this a small position in my portfolio, for the reasons I’ve outlined above.

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A top UK cybersecurity share

Kape Technologies (LSE: KAPE) is a UK-listed cybersecurity company with products focused on privacy and digital security. It’s growing strongly. In 2020, revenues increased 85% to $122.2m (£87.88m). It’s little surprise then that the share price is also doing very well. Shares in Kape Technologies have more or less doubled over the last year.  

Analysts at Progressive Equity Research expect revenue growth to remain very strong, while the price-to-earnings ratio will fall over the next few years due to strong earnings. The analysts expect revenues in 2021 to be £200m and £250m in 2022. For context, revenue in 2018 was £52.1m. It’s not all about the top line though. In 2021, profit before tax is expected to be £64.3m.

Demand for VPNs, privacy on the Internet, and cybersecurity will only grow as the world moves increasingly online. I think these trends will underpin further growth in the Kape Technologies share price. The biggest risk is competition, along with a high P/E that means any future underperformance could see it heavily punished.

A cybersecurity expert

NCC Group (LSE: NCC) is just a little bit bigger than Kape when it comes to market capitalisation. It’s closing on becoming a £1bn company. The cybersecurity group upgraded its full-year expectations earlier this year following better-than-expected trading towards the end of the year.

It expects revenue for 2021 to be slightly ahead of the prior year, while adjusted earnings before interest and tax are set to be towards the higher end of consensus expectations of between £33.7m and £36.2m.

NCC Group provides assurance services to clients all over the world. Increasing regulation, along with sophisticated hacking, including by state-sponsored hackers, means this work won’t dry up anytime soon.

The business has a forward P/E of 26 and a PEG of only one. These both make it look relatively good value for a business that is future proof and able to grow revenue.

The downside is profits have been a bit lumpier and the business is more people reliant than product-focused cyber companies. It has huge potential, but between the UK companies, I prefer Kape Technologies. Indeed, I held shares in Kape until recently, selling to lock in profits. If the share price dips I’ll consider buying back in given the huge growth potential. 

A US option 

In the US, I think Crowdstrike is right up there among the best of the cybersecurity companies, so I’m very tempted to add it to my portfolio. There are a number of other US-listed options like Palo Alto Networks and Fortinet. They are all potentially very financially rewarding, but I like Crowdstrike because its share price has serious momentum, well outperforming the S&P 500. 

It’s innovative, growing fast, and about to enter the Nasdaq-100 Index. The potential downside is its a very crowded market. Given the growth in the industry, that’s only likely to increase in the future, which may limit Crowdstrike’s growth or margins. 

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