Today I’m looking at three of the most exciting and fast-growing tech stocks on the UK market.
These three companies have all beaten the market by at least 35% over the last two years. Today I’ll ask whether these top performers still justify a buy rating.
There’s no competition
I’m sure that most of us have browsed the paper or online pages of Auto Trader Group (LSE: AUTO) at some point. Since joining the FTSE 250 in March 2015, Auto Trader’s share price has risen by 51% and the group has joined the dividend list.
Should you invest £1,000 in Amino Technologies Plc right now?
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This business appears to enjoy many of the same advantages as property titan Rightmove. Auto Trader reported an underlying operating margin of 66% during the first half of the year, thanks partly to the number of consumer visits rising by 36% to 58.5 million during the period.
Auto Trader claims that its consumer audience is four times larger than that of the nearest competitor. The only risk I can see is that at some point in the future, large, Uber-type fleets of self-driving cars will make car ownership irrelevant.
Until then, I suspect Auto Trader will continue to deliver. On a 2017/18 forecast P/E of 23, the stock isn’t cheap. But net debt is falling rapidly. This could mean that share buybacks and dividends will be scaled up. I’d continue to hold.
A best buy?
Amino Technologies (LSE: AMO) makes set-top boxes for delivering internet TV to televisions and other domestic devices. It may sound like a dull business, but Amino’s performance over the last year suggests otherwise.
The group’s sales rose by 80% to £75.2m last year, thanks to the acquisition of rivals Booxmedia and Entone in 2015. Pre-tax profit rose by even more, climbing 96% to £10.2m. Strong cash generation enabled Amino to end last year with net cash of £6.2m.
Amino shares have risen by 75% over the last year, outperforming those of Auto Trader. But the stock’s valuation remains modest. Earnings are expected to rise by a further 29% to 13.2p per share this year, putting the stock on a forecast P/E of 15. Analysts expect dividend growth to be maintained at 10%, giving a prospective yield of 3.4%.
Investors need to watch out for any sign that Amino’s technology is becoming redundant. But the group’s attractive growth forecasts and modest valuation suggest to me that this stock remains a buy.
A punt on this stock could pay off
Investing in the shares of online gaming specialist 888 Holdings (LSE: 888) could turn out to be a profitable bet. The group failed in its attempt to buy rival bwin.party in 2015, but is delivering attractive organic growth.
888’s revenue rose by 19% to $262m during the first half of last year, thanks to strong results in Casino and Sports betting. Full-year earnings are expected to be in line with expectations, suggesting adjusted earnings growth of 18% in 2016.
Although the shares trade on a forecast P/E of 19, 888’s strong conversion of profits into surplus cash means that the stock still offers an appealing potential dividend yield of 4.4%.
