After years of steady progress in the FTSE 250, Computacenter (LSE: CCC) has now been promoted to the FTSE 100. And the valuation gap it carries is striking.
The group’s long record of profit growth and cash generation has gone largely unnoticed by the wider market. And with the shares still trading at a clear discount to peers, this promotion could finally bring the re-rating the business has long earned.
So, where ‘should’ the shares be trading?
How big is the price-to-valuation gap?
In stock investing, price and value serve very different functions. Price represents the current market consensus, but value reflects the underlying business performance and future cash flows.
Recognising the gap between the two is essential for long‑term investors, as history shows that market prices generally converge towards fair value as time passes.
Discounted cash flow (DCF) analysis is the best way I have found to identify this value. It estimates where a stock should trade by forecasting future cash flows and discounting them back to today.
The more uncertain earnings forecasts are, the higher the discount applied. Differences in assumptions relating to this factor and others are why analysts’ DCF modelling can vary. However, based on my DCF assumptions — including an 8.4% discount rate — Computacenter shares appear 49% undervalued at their current £41.65 level.
That points to a fair value of £81.67 — nearly twice the current price. And because of the trend for prices to converge to fair value over time, this suggests a potentially superb buying opportunity if that DCF modelling holds good.
How does the profit growth profile look?
Sustained profit rises over time are the key driver for any stock’s price in the long run. There are risks here for Computacenter, of course, as with any business.
One is that weaker corporate IT spending — especially in the UK, Germany or the US — could pressure margins. Another is that supply‑chain issues in its technology sourcing division could disrupt delivery schedules.
Nevertheless, analysts project that its profits will increase at an average of 12% a year to end-2028 at least.
Do the results support this view?
Its full-year 2025 results look highly supportive of these forecasts. Revenue rose 33% year on year to £9.194bn — underlining the reason why it is often known in financial circles as ‘the invisible giant’. The growth here was driven by exceptional technology sourcing demand across North America.
Gross profit increased 11% to £1.144bn, while adjusted net funds — effectively the free cash flow position — climbed 26% to £606m. The numbers reflected strong cash generation and disciplined working‑capital management.
Crucially, as well, the committed product order backlog surged 200% to a record £7.1bn. The stunning rise reflected the depth of demand across all geographies for the firm’s offerings. And it provides powerful visibility for continued earnings growth ahead.
My investment view
For value‑focused investors, the combination of strong cash generation, rapid backlog growth and a clear DCF‑based undervaluation makes Computacenter hard to overlook.
Its scale, resilience and long record of steady profit expansion suggest the market has yet to fully recognise the quality of this newly‑promoted FTSE 100 giant.
With the stock still trading well below fair value on my modelling, I will buy it very soon and think it well worth other investors’ consideration too.
Should you invest £5,000 in Computacenter Plc right now?
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Simon Watkins does not hold any positions in the companies mentioned.
