Of course, success depends on whether the business has the wherewithal to recover from its troubles. The last thing you want to be doing is buying into a company that’s in terminal decline. With this in mind, I’m looking today at the outlook for unloved FTSE 100 stock BT (LSE: BT-A). I’ll come back to the telecoms giant shortly, after looking at a smaller company that’s already in recovery mode.

Isolated incident

UK leader in connected healthcare software and services Emis (LSE: EMIS) saw its shares crash from over 1,000p at the end of last year to a low of near 700p in February. This followed a review by the group’s new chief executive that identified a failure to meet certain service levels and reporting obligations relating its web product for GPs.

However, the shares began to recover after the company’s annual results in March. By then, the failures relating to the GP product looked very much like an isolated incident. Half-year results announced this morning have sent the shares 3% higher to 941p, as I’m writing.

Positive outlook

The company said it expects the settlement relating to the GP product will be within the £11.2m provision it announced in March. Meanwhile, an encouraging first-half performance saw net cash on the balance sheet at the period end of £32.3m, up from £14m at the end of December.

I’ve been impressed by the new chief executive and reckon the changes he’s made, including a strengthening of the senior leadership team, bode well for the future. As such, and with the perennial need of the NHS to manage costs and improve efficiency, I continue to rate the stock a ‘buy’. That’s despite a relatively high current-year forecast price-to-earnings (P/E) ratio of 20.7, and a fairly modest dividend yield of 2.9%.

Bargain buy?

The BT share price hit multi-year lows of not much above 200p earlier in the summer, and it remains relatively depressed at sub-220p. This gives a current-year forecast P/E of just 8.3, with a huge prospective 7% dividend yield.

My Foolish colleague Alan Oscroft recently wrote about some of the key issues facing BT. He identified net debt, a pension deficit and a wobbly-looking TV sports strategy. I view a net debt/equity ratio of 0.93 as not too scary, while the pension deficit should start to fall under an agreed payment plan. Now-rising interest rates are also likely to be helpful. Having said that, the financial position isn’t ideal and I wouldn’t be surprised to see the dividend reduced, if not in this financial year, then in the next.

Turning to the group’s businesses, I remain convinced BT has scale and competitive advantages in key areas that can drive a recovery under the right management. With this in mind, I view the installing of a new chairman late last year and the upcoming replacement of the chief executive this year in a positive light. I think BT might just prove to be a bargain buy at the current share price.

The post Is the BT share price a top FTSE 100 bargain buy? appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Emis Group and Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The review has identified a failure to meet certain service levels and reporting levels with NHS Digital. It relates to the company’s web product for GPs in England, with the findings having been fully disclosed to NHS Digital.

The financial impact of the issue is still unclear, as it has only just come to light. However, the company estimates that it could be in the upper single-digits of millions of pounds. With the firm having made a pre-tax profit of £25m in 2016, this is a sizeable amount for the business.

Improving trading

As well as the results of its review, EMIS also released a trading update for the 2017 financial year on Thursday. The company’s performance has been in line with expectations, excluding the potential losses from the aforementioned review. Full-year revenue was slightly ahead of the comparative period as it benefitted from growing recurring revenue, strong market shares and good momentum in its order books and pipelines.

Furthermore, the internal reorganisation programme has been completed, with a renewed focus on improving day to day operational management. With the company having a balance sheet which includes £14m of net cash, it appears to be in sound financial shape for the long run.

Recovery potential

With EMIS trading on a price-to-earnings (P/E) ratio of 16.3 even after today’s share price fall, its valuation appears to be high. Certainly, the business has growth potential, but this may be scaled back over the near term by the outcome of the review. As such, it may not be able to sustain its current valuation over the coming months, since investors may reduce their growth expectations for the business. This means that now may not be the right time to buy it for the long term.

Improving outlook

Also operating in the software and computer services industry is Iomart (LSE: IOM). The cloud specialist has a solid track record of earnings growth, with its bottom line rising at an annualised rate of 15% during the last five years. More growth is set to be delivered over the next couple of years, with the company’s bottom line due to rise by 13% next year, and by 9% in the following year.

With Iomart trading on a price-to-earnings growth (PEG) ratio of 1.4, it seems to offer excellent value for money. The company appears to be making encouraging progress with its strategy and when its consistent growth prospects are factored in, there could be scope for a higher rating over the medium term.

With dividends per share forecast to grow by 28% during the next two years, the stock has a forward yield of around 2.2%. This is from a dividend which is expected to be covered 2.6 times by profit. As such, more growth in shareholder payouts could be ahead.

The post Is EMIS plc a falling knife to catch after today’s 20% slump? appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended Emis Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I believe that dividend growth investing is like compound interest on steroids. As the value of the dividend income you receive grows each year, the value of the underlying shares tends to rise too, as the market prices-in a higher income.

The total returns from this style of investing can be impressive. So today I’m going to look at two stocks I believe could be excellent dividend growth buys.

A sticky business

One way to identify potential dividend growth stocks is to focus on companies with ‘sticky’ customers. Typically this means selling a product or service that’s hard to replace.

I believe AIM-listed healthcare software firm Emis Group (LSE: EMIS) fits this description. This £622m company provides a wide range of software for the NHS, including patient record systems, pharmacy software and other more specialist services.

The company’s three main divisions have UK market share of between 26% and 56%, according to today’s interim results. In all, 84% of the group’s revenue is recurring — based on subscription services or annual renewal.

A strong market share combined with high levels of recurring revenue make it easy for companies to gauge their future profits and cash flow. This also makes it easier for management to provide consistent dividend growth.

This promise is reflected in today’s half-year results. Total revenue rose by 1% to £79.2m during the first half. Although the group’s adjusted operating profit fell by 1% to £17.5m, this still gives an impressive adjusted operating margin of 22%.

Even better is that cash generation improved. Emis’s net cash balance rose to £10.5m, from £0.7m one year ago.

Management expects the group’s performance to be stronger during the second half of the year. To reflect its strong cash position, the interim dividend has been increased by 10%, to 12.9p.

Dividend growth has averaged 13% per year since 2011, and although the forecast yield of 2.5% is quite modest, I believe this business has the potential to provide inflation-beating dividend growth over long periods.

How about a 5.1% yield?

If you’re looking for more upfront yield, then the FTSE 100 can be a good place to look. One of the largest holdings in my personal portfolio is insurance group Aviva (LSE: AV).

Under chief executive Mark Wilson, Aviva has been refocused to deliver sustainable growth backed by strong cash generation. Mr Wilson’s efforts so far have been very successful, in my view. But the market has remained fairly cautious.

The group’s shares currently trade on less than 10 times forecast earnings, and offer a prospective dividend yield of 5.1%. The dividend is expected to rise by 12% this year and by 7% in 2018. It’s worth noting that this rate of growth is well above inflation and average wage growth.

Aviva’s finances are much stronger than they were a few years ago. I believe that patient shareholders are likely to enjoy steady dividend growth over the coming years. I’ve no intention of selling my shares just yet.

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Roland Head owns shares of Aviva. The Motley Fool UK has recommended Emis Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Premier Technical Services

Premier Technical Services (LSE:PTSG) has been a high flyer over the last two years with shares in the facilities management specialist jumping from around 58p to 115p, a gain of nearly 100%.

The company focuses on the high margin niche area of facade access and fall arrest equipment services, operating through four key divisions: access & safety, electrical services, high level cleaning and training solutions. Founded in 2007, the group services over 150,000 buildings across the UK in a wide range of industries.

Through a combination of acquisitions and organic growth, revenue has surged higher over the last five years, climbing from £9m in FY2011 to £39m last year. Net profit has increased from £0.5m to £2.3m in this time. City analysts forecast revenue to climb 16% to £45.6m this year, and earnings per share of 8.25p, placing the company on a forward looking P/E ratio of just 13.9.

Management is upbeat about the future, recently stating: “The board is confident that the business is in a strong position to continue to grow both organically and through carefully selected acquisitions, which seek to achieve sector dominance in our chosen areas of operation.“

While this all sounds great, the one thing to watch here is the company’s operating cash flow, which over the last two years, has been negative. A drill-down into the financials reveals that accounts receivable hav risen from £1.6m in FY2014 to £6.1m last year, which is not ideal. Indeed, an increase in accounts receivable is often viewed as an accounting red flag as it indicates that cash is not coming through the door. This is clearly something to keep a close eye on and for this reason, I won’t be looking to buy the stock just yet.

Emis Group

One company that does look quite interesting in my opinion, is Emis Group (LSE: EMIS).

Emis specialises in healthcare software, running IT systems for GPs, hospitals and pharmacies and assisting medical practices by digitising patient records. With the NHS constantly looking to drive down costs and improve efficiency, demand for its products should remain robust in my view.

While revenue has jumped from £73m five years ago to £159m last year, growth has slowed recently, and as a result, it appears that some investors have jumped off the bandwagon. The shares have pulled back around 20% over the last 18 months.

Has that created an investment opportunity? 

Emis released a trading statement for the six months ended 30 June this morning. While details were brief, management said revenue was “slightly ahead of the comparative period as the group continued to benefit from growing recurring revenue, strong market shares and good momentum in its order books and pipelines.” New CEO Andy Thorburn commented that he believes that Emis can “continue to generate good levels of growth in the years ahead, despite the challenging funding environment in the NHS.”

City analysts forecast net profit to surge over 60% this year and have pencilled-in a dividend payout of 25p per share, and with that in mind, on a forward looking P/E ratio of 19, I reckon Emis Group could be worth a closer look for those with a long-term mindset.  

The post Could these two small-caps set you on the path to financial freedom? appeared first on The Twelfth Magpie.

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Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Healthcare boom

Shares in EMIS Group (LSE: EMIS) have been behaving a bit weirdly, dropping 25% since a peak in January 2016 to 867p. Had the healthcare software and services specialist been in any trouble I’d understand it, but it’s been putting in steady year-on-year earnings growth, and that looks set to continue.

I suspect it’s the same thing that happens to most popular growth stocks – the share price flies in the early days, and when the initial rapid earnings growth inevitably slows, short-term investors leap off the bandwagon and go seek their next get-rich-quick fix.

In the case of EMIS, 2016 saw adjusted earnings per share rise 9% to 49.4p, and that’s a slowdown from the 15% recorded in 2015 and the double-digit rises of the past five years. But it was ahead of forecasts on a 6% rise in adjusted operating profit, and it enabled the dividend to be lifted by 10% to 23.4p.

Chief executive Chris Spencer did speak of “short term headwinds“, but in the longer term I see EMIS’s technology in greater demand, especially with the recent Wachter Report prioritising the importance of “a fully digitised NHS“.

Forecasts suggest EPS growth of 6% per year for the next two years, but I see that as overly conservative. I’d be surprised to see EPS at less than 100p in 10 years time, and to maintain a P/E of around 15 that would suggest a share price of 1,500p – add in dividends, which are nicely progressive, and that would double an investment made today.

Storming bank

My second pick is perhaps a more obvious growth star: OneSavings Bank (LSE: OSB), whose shares have already climbed 145% since floating in June 2014. The Brexit result caused a bit of a crash, but the price has more than recovered since then, and at 417p the shares are well up on their pre-referendum level.

For 2016, OneSavings has reported a 29% rise in underlying pre-tax profit, to £137m, with its underlying loan book up 20%, and underlying earnings per share up 20% to 41.7p.

The dividend was raised by 21% to 10.5p per share. That’s a yield of only around 2.5%, but forecasts have that rising to 4.1% by 2018 after two more years of predicted earnings rises.

Chief executive Andy Golding said that the bank has “once again met or exceeded all of the financial objectives we set at IPO despite a number of regulatory and tax changes.” He added: “OneSavings Bank is well placed to take advantage of opportunities in our core businesses in 2017 and we remain confident in our ability to generate attractive returns for our shareholders.“

Forecasts put the shares on a P/E of nine for 2018, and that looks way too low to me with the long-term FTSE 100 average being around 14 – especially if OneSavings really does offer dividends in excess of 4% by then.

Brexit uncertainty is surely behind a lot of the apparent undervaluation, and that will be settled in a couple of years. I expect to see banks back to around average P/E valuations in five years at the latest, and I reckon continued EPS growth could easily see OneSavings shares doubled by then.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Emis Group. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

So it’s unsurprising if some small-caps have fared worse than their traditionally-less-risky blue chip counterparts. Among those companies that have seen their share prices dip over the last year have been healthcare software and services supplier EMIS (LSE: EMIS) and photobooth operator, Photo-Me International (LSE: PHTM). Could these stocks get back on track in 2017? I think so and here’s why.

In need of resuscitation?

EMIS doesn’t generate many column inches, yet it plays a significant role in our lives. The £541m cap is often the first choice of GPs, hospitals and pharmacies up and down the UK for digitising patient records and providing IT solutions. The fact that EMIS already has a significant share of this market makes it highly attractive as an investment. After all, it’s simply too much hassle to switch IT systems regularly, especially if you’re dealing with something as important as healthcare.

So why the drop from the all-time high of 1,155p back in January to today’s more subdued 860p? Although the aforementioned flight from more risky shares can’t be overlooked, cuts in NHS spending and a reduction in the number of acquisitions have clearly hurt sentiment towards the stock. Will this fall continue? Given the benefits that come from implementing the company’s software (reduced operating costs, improved patient services), I’d be very surprised.

On a forecast price-to-earnings ratio (P/E) of 16 for 2017, shares in EMIS aren’t screamingly cheap when compared to other stocks on the market. They are, however, considerably less expensive than they’ve been in the past, leading me to also consider the company’s potential as a bid target.

Picture perfect?

Bookham-based Photo-Me International is another small-cap whose share price has been heading in the wrong direction of late. Since reaching a 16-year high of 178p back in March, shares in the £538m cap have dropped back to 140p. I suspect this may be short-lived, particularly as the company stands to benefit substantially from the continued implementation of the My Number identity card scheme in Japan. The potential need for 3D images in the future could also act as a catalyst for growth.

There are other things to like about Photo-Me. The company can boast excellent levels of return on capital in recent years along with rising operating margins. Its net cash position is also a major positive. But perhaps the biggest draw is the generous yield on offer. As things stand, Photo-Me is expected to pay out just over 7p per share to investors in 2017, equating to a yield of 4.91%. That’s an awful lot more than you’d get from a typical savings account.

The only thing that concerns me here is the dwindling dividend cover. Next year, it’s expected to drop to 1.17. This shouldn’t be a problem if Photo-Me’s earnings recover over time, of course, but it’s certainly something for income investors to ponder before snapping up the shares.

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The LSE has never been the exchange of choice for tech stocks and the departure of ARM Holdings in September has only made things worse. That’s all the more reason why growth-hungry investors shouldn’t ignore the potential to be found in AIM-listed tech shares.

One investor favourite is theme park ticketing vendor Accesso Technology (LSE: ACSO) whose shares have increased in value over 900% in the past five years. Providing ticketing technology and queue management solutions for roller coasters and water parks may not be a sexy industry, but with thousands of such venues across the world, Accesso has a huge market to tap.

The company has done this with aplomb and revenue has jumped more than 180% over the past half decade. This success is due to Accesso rolling out devices that benefit both parks and their customers by allowing guests to buy tickets online, reserve spots on rides, and boosting cross-selling opportunities by reducing the amount of time guests spend waiting in long lines.

This is obviously an attractive proposition for park operators and major brands such as Six Flags and Merlin Entertainment have rushed to sign long-term contracts for Accesso’s services. The opportunities for Accesso to continue growing are especially bright given the ubiquity of smartphones and consumers’ increasing acceptance of mobile payments. Guests can now use Accesso’s technology to buy their tickets, souvenirs and food & drink all with a tap of a button on their phone.

Financially the company is on sound footing with net debt less than one times full-year EBITDA, and operating margins of 8.2% looking likely to rise as recent acquisitions are integrated and cost of sales fall due to recurring revenue from major contracts. Shares are pricey at 47 times forward earnings but I’ll continue to watch Accesso closely in the coming quarters.

Banking on health

If there’s one subject that Labour and the Tories both agree on it’s the need for the NHS and healthcare industry more broadly to rapidly embrace technology in order to lower costs and improve patient outcomes. That’s where EMIS Group (LSE: EMIS) comes in.

EMIS digitises and standardises patient records, develops software for medical practices and runs IT systems for GPs, hospitals and pharmacies. This has unsurprisingly been a winning combination for physicians looking to simultaneously lower non-medical operating costs and improve patient services.

EMIS has been growing at a steady clip, although over the past half year, revenue growth slowed to 1% as NHS spending fell and the company made few acquisitions. In the long term there are certainly major growth prospects as the company’s 55% primary care market share and 14% market share for child, community and mental health care offer significant room to grow.

Aside from top line growth, I’ll also be watching whether the company can improve margins enough to continue growing profits and dividends at a steady clip. There was success on this front over the past six months as adjusted operating margins rose from 21.7% to 22.4% year-on-year, allowing dividends to rise 10% during the period.

Slowing growth is a worry, but it could simply be a single quarter hiccup and with a large untapped market ahead and a relatively sane valuation of 19 times forward earnings, I believe EMIS deserves a closer look for tech investors.

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This is a key reason why ARM (LSE: ARM) is such an appealing stock. It’s now becoming a more mature business, offering a relatively stable financial outlook as well as increasing dividends at a rapid rate. However, it still offers a stunning rate of growth, with ARM’s bottom line forecast to increase by 43% in the current year and by a further 15% next year. And with ARM investing heavily in new market segments such as the Internet of Things, its longer-term growth potential remains highly encouraging.

With ARM trading on a price-to-earnings growth (PEG) ratio of just 1.5, it seems to offer substantial upside potential. Therefore, it remains a super growth stock worth buying for the long term.

Capital gain potential

Also offering upbeat growth prospects is patent translation specialist RWS (LSE: RWS). Its bottom line is forecast to rise by 27% in the current year and by a further 8% next year. Furthermore, RWS has a relatively wide economic moat and with it having a relatively consistent track record of growth, it seems to be an excellent growth play for the long term.

While RWS trades on a P/E ratio of 21, it still offers significant capital gain potential. Investor sentiment remains strong, as evidenced by its share price rise of 58% in the last year. And while RWS is expected to raise dividends per share by 6% this year so that it yields 2.4%, it remains an excellent growth play that has been able to increase its bottom line at an annualised rate of 10% over the last five financial years.

Wait and see

However during this period, connected healthcare software specialist Emis (LSE: EMIS) has been able to grow its bottom line at an even more appealing annualised rate of 12.4%. This shows that it has been an excellent growth play, with its share price soaring by 98% during the last five years.

Looking ahead, Emis is forecast to post strong growth numbers. Its earnings are expected to rise by 8% in the current year and by a further 9% next year. However, with the company’s shares trading on a P/E ratio of 20.7, Emis appears to be rather fully valued at the moment.

Certainly, with uncertainty among investors regarding the global macroeconomic outlook being high, more reliable growth stocks such as Emis could be of real value. But with other growth plays offering better value for money, it may be prudent to await a lower share price before piling-in to Emis.

The post 3 super growth stocks? ARM Holdings plc, Emis Group plc and RWS Holdings plc appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of ARM Holdings and RWS. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

In such an environment, companies in defensive sectors with relatively dependable earnings and dividends, can provide returns that are hard to come by in other areas of the market. Companies whose growth prospects will be largely determined by their own progress, rather than by the macroeconomic background, can also provide such returns.

Three companies that fit the bill, and which could be well worth buying today, are AstraZeneca (LSE: AZN), EMIS Group (LSE: EMIS) and OptiBiotix Health (LSE: OPTI).

AstraZeneca

Big pharma is a classic defensive sector, although a spate of patent expiries on a crop of the industry’s blockbuster drugs has rather masked the fundamental attractiveness of pharmaceutical giants and dampened their earnings and share-price performances in recent years.

AstraZeneca’s future is beginning to look brighter again as it deals with the loss of patent protection for star turns Nexium, Crestor and Seroquel. Earnings declines are bottoming out, and a promising pipeline of new products, and recent deals, including a majority stake in Acerta Pharma and the acquisition of ZS Pharma, are set to drive strong top-line and bottom-line growth from next year.

At a current share price of around 4,300p, Astra trades on 15 times forecast 2017 earnings and offers a healthy prospective dividend yield of 4.3%, which adds up to a good deal for investors, based on growth projections through to the next decade.

EMIS Group

EMIS is the UK leader in “connected healthcare software and services”, and is well-positioned for growth in a tough environment. Its technology enables clinicians to share vital information in healthcare settings from primary and community care, to high street pharmacies, secondary care and specialist services. The NHS’s perpetual battle to manage costs and improve efficiency provides a strong underpin for EMIS’s growth.

The company has been delivering regular annual top-line and bottom-line growth in double-digits, which is set to continue. However, the shares fell by as much as 16% early today following the release of the company’s year-end trading update. The annual consensus had been for 16% revenue growth for the year, but management said growth came in at 13%, having been held back by the timing of contracts within secondary care, and it also expects to report a partial (non-cash) impairment in goodwill for the division.

However, these negatives appear relatively minor. Overall trading was in line with management expectations, and the company has “maintained its customarily strong revenue visibility, order book and pipeline”. EMIS remains an attractive steady-growth story for all seasons. The shares have recovered somewhat from their early drop today, and the company appears a solid buy at 980p on 19.6 times forecast 2016 earnings with a prospective dividend yield of 2.4%.

OptiBiotix Health

OptiBiotix is very much one of those companies I referred to earlier, whose growth prospects will be largely determined by their own progress, rather than by the macroeconomic background.

This small-cap firm is valued at around £55m at a share price of 73p. It’s a life sciences business developing compounds to tackle obesity, high cholesterol and diabetes. The company has no revenues as yet, but its portfolio of patents on compounds that change the way that microbes in the body work and interact is receiving considerable interest from some big players.

There’s an option agreement on OptiBiotix’s cholesterol-reducing product “with a multinational consumer goods company” (rumoured to be US giant Procter & Gamble). Meanwhile KSF Acquisition, with whom OptiBiotix announced a commercial agreement last week, may not be quite as familiar a name as P&G, but a note at the foot of the announcement reveals that KSF is “an investee of Kainos Capital, with a responsibility for the SlimFast brand in the UK, Ireland and Germany”.

OptiBiotix’s products appear to have considerable promise, and if deals with the likes of P&G and SlimFast progress, this small-cap company should grow rapidly whatever the macroeconomic background.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The latest bad news for shareholders came in a trading update last month for the company’s half-year ending 30 September. Blinkx said it expects to post revenue of $85-$95m for the period. This compares with revenue of $106m in H1 last year and $112m in H1 the year before. The problem is an industry shift away from desktop and “evolving standards” (basically, a euphemism for advertisers demanding greater verification and filtering to ensure they are reaching their target audiences).

As well as the pressures on revenues, there is a double whammy in that the programmatic trading and mobile usage, to which the industry is migrating from desktop, is lower margin. Blinkx expects to make a $5-$8m EBITDA loss (earnings before interest, tax, depreciation and amortisation) for the current half-year, compared with a $1m profit in H1 last year and an $18m profit in H1 the year before.

One positive is that Blinkx has plenty of cash: it has guided on $82-$85m for the 30 September half-year end — although this is a hefty drop on the $115m of 12 months ago. Some see value in the stock at current levels. For example, Blinkx notified the market today that hedgefund Tosca has just increased its stake in the company to over 20%.

Can Blinkx turn its business around and how profitable might it be in the new industry environment? We won’t know the answer for some time. As such, for me, this is a stock to watch rather than buy.

Optimal Payments

In contrast to Blinkx, online payments group Optimal Payments (LSE: OPAY) is a stock whose currency is rising. After a recent transformational acquisition of rival Skrill, the AIM-listed group is valued at £1.5bn (at a recent share price of 313p), and intends to move to London’s main market, where its size would make it eligible for inclusion in the FTSE 250. Optimal Payments today announced an EGM on 28 September for shareholders to vote on a new memorandum and articles of association and a change of the company’s name to Paysafe Group.

Looking ahead to next year, analyst earnings forecasts for the enlarged group give a price-to-earnings (P/E) ratio of 18, which is about average for a FTSE 250 firm. With earnings growth forecast to be 18%, the P/E-to-earnings growth (PEG) ratio is bang on the fair value marker of 1.

I have a couple of concerns about Optimal that are buried in last year’s annual report: namely, “approximately 37%” of revenue came “from one customer”, and the group has “a material indirect dependency on the Chinese online gambling market”. These represent not insignificant risks. Anyone who recalls Optimal in its previous guises will know that the company was hammered by regulation of the US online gambling market a decade ago.

EMIS Group

EMIS Group — valued at £620m (at a recent share price of 986p) — is a “blue-chip” AIM company, but nowhere near as much talked about on private investor bulletin boards as Blinkx and Optimal. EMIS describes itself as “the UK leader in connected healthcare software and services”. It helps clinicians share vital information, and its solutions are used across every major part of the UK healthcare network. There is good momentum in the business, because the NHS is desperate to cut costs and improve efficiency.

In its half-year results announced today, EMIS reported a 17% rise in revenue to £78m, of which 78% was recurring revenue. Earnings were up 18% and the Board increased the interim dividend by 15%. If earnings growth were to continue at the same rate, the current-year P/E would be 21, falling to 18 next year. The 2016 P/E and PEG, then, come out identical to those of Optimal Payments.

EMIS has “some concentration of risk, as the Group trades extensively with various parties within the NHS”, but I would suggest this risk is significantly lower than Optimal’s single customer and China risks. As such, EMIS looks buyable to me, although I would be hoping for a bit of a pullback after a 5% rise in the shares on today’s results.

The post Should You Buy Blinkx Plc, Optimal Payments Plc Or EMIS Group Plc? appeared first on The Twelfth Magpie.

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G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.