Many tech stocks have exploded in recent years due to the digital revolution. With a potential artificial intelligence (AI) revolution around the corner too, one growth stock I’m considering for my holdings is Computacenter (LSE: CCC).
IT infrastructure
Computacenter is Europe’s leading provider of IT infrastructure. Its expertise covers technology sourcing, infrastructure integration, and managed services. In simple terms, it helps public and private sector firms to utilise technology to work more efficiently, saving time and money, as well as keeping up to date with the leading technology available.
So what’s happening with Computacenter shares currently? Well, as I write, they’re trading for 2,146p. At this time last year, they were trading for 2,528p, which is a 14% drop over a 12-month period.
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Many stocks have fallen due to tough macroeconomic conditions, which have hampered global markets. In fact, this turn of events has thrown up many stock market opportunities to buy quality shares at a cheaper price.
A growth stock to buy or one to avoid?
Starting on a positive note, Computacenter could be characterized as a fairly reliable performer. In its most recent full-year results announced in April, it said that revenue increased a healthy 29% and profit edged up to £249m, an increase on the previous year. This positive performance saw its dividend increased by 2%. It also has a good track record of past performance. However, I am aware that past performance is not a guarantee of the future.
Next, Computacenter’s current dividend yield stands at a respectable 3%. This is higher than the FTSE 250 average. I am aware that dividends are never guaranteed. In addition to this, the shares look decent value for money on a price-to-earnings ratio of 13.
I’m buoyed by Computacenter’s record of performance and returns, but I believe this is underpinned by its diversified offering and established customer base. All of these aspects could continue to boost future earnings and returns. More importantly for me, Computacenter has recognized the need to move with the times and has incorporated AI-based solutions into its offering. This is what I’m looking for in any growth stock — future avenues to boost the business and performance.
From a bearish perspective, Computacenter could struggle, at least in the short term, due to budget constraints. This is linked to a tougher economic outlook at present. Furthermore, many businesses spent heavily during the pandemic period to set up home working. With this now over, spending levels could reduce, impacting Computacenter’s margins and potential returns.
Finally, competition in the tech space is intense, and the race to dominate the AI space is another factor I must consider that may impact Computacenter and its performance adversely.
My verdict
After taking into consideration the pros and cons, I like the look of Computacenter shares. I believe it could be an exciting growth stock with some good times ahead. I would buy some shares if I had the spare cash to do so.
Computacenter’s record of performance and reputation in the market helped me make my decision. In addition to this, the shares look cheap at present with a good passive income opportunity too.
