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Two technology stocks from the UK that are safe bets for the long-term
Stock Analysis & Ideas

Two technology stocks from the UK that are safe bets for the long-term

Story Highlights

These two British companies, Kainos Group and Softcat, offer strong potential for growth – here’s why.

The UK technology industry has grown over the last few years, especially in fashionable technologies including fintech, AI and cybersecurity.

Kainos Group (GB:KNOS) and Softcat (GB:SCT) are two such stocks that have traded down in the last year but have solid growth potential in their revenues. Their dividends are also higher than the industry standard.

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In such scenarios, we can use the TipRanks Stock Screener Tool to check some sector-specific stocks. This tool can help you see the overall performance of the shares based on any particular criteria or any sector.

Let’s see these stocks in detail.

Kainos Group

The UK-based software company, Kainos Group, provides technology solutions for digital transformation.

In the year 2022, the company reported revenue growth for the twelfth consecutive year. In May 2022, the company posted its annual results for the year with a 29% growth in its revenue of £302.6 million.

Bookings for the year were up by 35% to £349.8 million, as compared to 258.8 million in 2021. The numbers are driven by strong consumer growth across segments.

Customer approval rating remains high at 98% with an increase of 34% in existing customer revenues. In the current inflationary environment, companies are constantly looking for solutions that can help them reduce their costs and maintain profitability.

The company’s stock has generated a huge 203% return in the last three years. This is risky considering the future scope of share price growth. However, the stock is down by almost 25% in the last year and it creates a great buying opportunity as the revenue and profit growth potential are huge.

View from the city

According to TipRanks’ analyst rating consensus, Kainos Group stock has a Moderate Buy rating from three analysts. It includes two buy recommendations and one hold recommendation.

Kainos Group’s price target is 1,275p, which represents a -7.07% change in the price from the current level. The price has a low and high forecast of 1,200p and 1,350p, respectively.

Softcat

Softcat provides third-party IT solutions and services to companies and the public sector in various domains such as cyber security, data and analytics, software licensing, networking and security, and more.

SSoftcat’s stock has gone down by 36% in the last year. This was mainly the correction that happened in prices after the huge growth during the pandemic.

In its last half-yearly results reported in March 2022, Softcat’s revenue grew by 33.6% and operating profit by 12.4%. Performance was mainly supported by strong customer growth across all segments and cost control measures despite the supply disruptions of component shortages.

The company is optimistic about its full-year profits and expects them to be in line with expectations.

With the growing demand for flexible working solutions and more companies shifting to digital mode, Softcat is well-positioned to take advantage of this and further increase its market share.

What is the forecast for the stock?

According to TipRanks’ analyst rating consensus, Softcat stock has a Moderate Buy rating based on one Buy and one Hold recommendation.

The SCT stock forecast is 1,640p, which is 29% higher than the current level. The price has a low and high forecast of 1,640p.

Conclusion

Both tech companies have continued their track record and delivered strong growth in revenues and profits across their multiple segments.

The results surely demonstrate growing consumer demand for their services and their strong commitment to serving the customers efficiently.

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