Adjusted pre-tax profit for the year is now expected to be $11.5m, about 20% below last year’s figure of $14.6m.

This company produces hardware and software for TV set-top boxes, such as those used by cable TV operators. Management had previously expected that 2018 would deliver “sustainable profitable growth”. So what’s gone wrong?

Trump triggers EM wobble

Amino says that orders have been delayed during the second half of the year due to economic instability in “certain emerging markets”. The company says this uncertainty has been made worse by President Trump’s planned trade tariffs. Rising component prices are also expected to hit profits.

This downbeat assessment is a marked contrast to the more upbeat tone taken in the firm’s half-year results on 17 July, less than three months ago. Back then, the company said it was “successfully mitigating pricing pressure on components” and confirmed that “more than 75% of full-year revenues” were already secured.

The group’s financial year ends on 30 November, in less than two months’ time. I’m disappointed by this late change of guidance. I can only assume that several major orders have been delayed at the last minute.

A bargain buy?

One of Amino’s particular attractions is strong cash generation. This has fuelled dividend growth that’s seen the payout rise by 90% since 2013.

The company says this should continue in 2018, with a dividend increase of “no less than 10%”. Cash flow is said to remain strong and net cash is expected to be above the last-reported level of $15m at the end of November.

However, this payout is only expected to be “maintained” over the next two years, which suggests to me that management isn’t very confident about the outlook for 2019 and 2020.

After today’s fall, I estimate that the shares trade on about 10.5 times forecast earnings with a 5% yield. That’s probably about right for now, in my view. Given the company’s cash balance and previously good record, I’d rate the stock as a hold until we know more.

A superior choice?

One business I am more confident about is cloud computing company Iomart Group (LSE: IOM). It operates a number of well-known UK web hosting companies. It’s one of the larger players in this sector in the UK.

The group’s track record of growth is impressive. The shares have 10-bagged over the last 10 years and are up by 40% since I last covered them in 2017.

Sales have risen by 75% to £97.7m since 2014, while profits have climbed 60% to £12.3m over the same period.

This growth could continue

Iomart has expanded through a mix of organic growth and acquisitions. Debt levels are low and management recently confirmed that trading so far this year has been in line with expectations.

Broker consensus forecasts suggest that adjusted earnings will rise by 10% to 19.9p per share this year. This puts the stock on a forecast P/E of 20.7, with a prospective yield of 1.9%.

This isn’t cheap, but this company operates in a fast-growing sector and has an impressive track record of growth. For long-term investors, I think the shares could still be a profitable buy at this level.

The post Amino Technologies crashes 30%: should you load up, or buy this 10-bagger instead? appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of Iomart 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.

The yields are modest, with only 1.8% expected for the year to March 2018. But they’re almost three times covered by earnings and, more importantly for long-term income, they’re strongly progressive.

From just 1.4p per share in 2013, the Iomart dividend reached 6p in 2017, and there’s 6.77p forecast for this year — and that’s massively ahead of inflation.

In fact, if you bought Iomart shares back in March 2013, you’d only have paid around 230p for them. With the price currently around the 370p level you’d be sitting on a 60% gain. But, crucially for income seekers, the forecast dividend for this year would already be yielding almost 3% on your original purchase price — with 2020 forecasts suggesting 4%.

Results

Results should be out on 12 June, and Thursday’s update suggests they’re going to be impressive. The cloud computing specialist said it “expects to deliver another strong set of results delivering good growth in both revenue and profit.“

Revenue is expected to be up around 9%, with adjusted EBITDA up from £36.6m to approximately £39.8m and adjusted pre-tax profit up from £22.4m to approximately £23.9m. That’s all pretty much in line with previous expectations.

Looking to the longer term, the company said: “Given the sustainable nature of the market opportunity, a broadening product offering and a growing reputation within the cloud industry, the board anticipates that growth will continue in the future.“

With double-digit EPS rises forecast for at least two more years, I’m seeing good growth value here — with rapidly rising dividends thrown in.

Restructuring

Property investment firm Helical (LSE: HLCL) was struggling under its debt burden, but it’s been disposing of a lot of assets to get it down, and is focusing on higher quality income-based assets. 

Investors have responded cautiously, and since last July’s low point we’ve seen the share price gaining 11%.

Thursday brought a trading and portfolio update, confirming that the company has “largely complete the repositioning of the portfolio as planned.”

With the sale of industrial assets raising £170m, Helical has now offloaded a total of more than £250m in investment assets since the end of September. What’s more, it’s been at an overall premium of 8.5% over book value, so they’ve been reasonable investments too.

Add in the sale of Helical’s retirement village portfolio and C-Space London office scheme, and we’re looking at total disposals of £352m — which has brought net debt down from £626m at 30 September, to £373m. 

New focus

The company is now focused on eight London projects and four in Manchester, and during the year it has let over 254,000 sq ft of office space in them.

With the transformation plan essentially complete, what is emerging is a company with significantly better earnings prospects, now focused on letting income from its properties rather than asset appreciation. And with its significantly smaller but better focused and more profitable portfolio, I see an attractive new phase for shareholders. 

By the time earnings are ramped up as expected by 2020, we’d be looking at a P/E of a bit over 20. But with the dividend set to grow by 6% per year and better, I see long-term value. 

The post 2 hidden dividend plus growth stocks I’d buy with £2,000 today appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK owns shares of Iomart 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.

Sage advice

FTSE 100-listed The Sage Group (LSE: SGE) has enjoyed a storming five years, its share price up 161% in that time, including 22% growth in 2017 alone. With a current market cap of £8.61bn it is hardly a big fish like Apple Inc, but it isn’t small fry either. I spotted a buying opportunity in April when the share price hit 654p. Today it is 22% higher at 797p.

Sage offers integrated accounting, payroll and payments solutions to businesses around the world, and last August was picked out as a ‘Best of British’ stock by Goldman Sachs, which reckons it should benefit from improved renewal rates and customers switching to its subscription-based model with more cross-selling opportunities.

Silver lining

In November, Sage reported strong 6.6% revenue growth to £1.7bn for the year, with recurring revenues making up 78% of the total, and software subscriptions up from 22% in 2014 to 37% today. The launch of Sage Business Cloud in October should further lift the business, as it has developed a range of cloud-based accounting software in just three years.

A growing company, in a growing area – what’s not to like? Not much, frankly. Sage’s earnings per share (EPS) have now grown for five consecutive years and are forecast to increase 12% in the year to 30 September 2018. The yield is 2.1%, well below the FTSE average of 3.81%, but cover is solid at two. Inevitably, the only thing not to like is the price, a forecast 23.6 times earnings. That is the price you pay for success and I would expect Sage to deliver more of it. Here’s another tech play you might like.

Cloud nine

Keeping our head in the clouds, we find technology high-flier AIM-listed Iomart Group (LSE: IOM). Its share price leapt 32% last year, and it is up a cracking 133% over three years. The cloud computing services provider reported positive half-yearly results in December, with revenue up 12% to £47m and adjusted profit before tax rising 9% to £11.6m. It also issued its maiden interim dividend of 2.25p per share.

Iomart is a small company with a massive target market as more businesses look for help in migrating to cloud platforms. It offers them the skills to manage private and public cloud services, with e-commerce one of its fastest-growing areas.

Float on

Today could be an attractive time to enter this £423m company, which reported an 18% jump in EPS in 2017, and its rich vein of earnings growth is forecast to continue at 7% in 2018 and 13% in 2019. By then, the yield is expected to hit 2%.

I was bracing myself for a stonking valuation given recent high growth rates, but Iomart currently trades at a forecast 18.7 times earnings, which is hardly daunting. Small-caps are always risky but the company’s low debt levels and high levels of cash generation bring comfort. The cloud is the limit.

The post These 2 tech stocks could make you amazingly rich in 2018 appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Sage 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.

It’s easy to see the growth potential that exists for companies that can host and handle these massive volumes of data. One small-cap player in this market is AIM-listed Iomart Group (LSE: IOM).

Iomart’s share price has risen by 544% over the last 10 years, giving early shareholders a five-bagging gain. But I think there could be more to come.

According to the company, its Cloud Services business won “a substantial amount of new business” last year. Revenue growth of 17% is expected for the year to 31 March, while adjusted pre-tax profit is expected to have risen by 19% to £22.4m.

This strong performance has resulted in strong cash generation over the year. As a result of the group’s low debt levels, the board has decided to increase the maximum dividend payout ratio from 25% to 40%.

Why are the shares down?

My reading of today’s sell-off is that investors were hoping for a more bullish message on growth. Perhaps another acquisition. The board’s decision to return more cash to shareholders suggests that it can’t find anything else to do with it.

Personally, I’m not too concerned. Iomart is growing strongly with very little debt and high profit margins. I’m happy that the board is taking a cautious approach to future growth. I wouldn’t want to see these key advantages eroded by management determined to grow at any cost.

Iomart stock now trades on a forecast P/E of 16, with a prospective yield of about 1.5%. In my view, this valuation could be a decent entry point for long-term growth — or a takeover — over the next 10 years.

Dull but very profitable

Carpet may not have the glamour associated with cloud-hosting services. But it’s a very profitable business for FTSE All-Share listed Headlam Group (LSE: HEAD) all the same.

Headlam stock has risen by 107% over the last five years, narrowly edging ahead of Iomart (+101%). However, this £525m business isn’t a high-cost retailer with hundreds of expensive shops.

Headlam is a wholesaler and supplies retailers and flooring contracts from a network of warehouses across the UK and Europe. The firm’s focus is on high stock availability and a prompt service, with many delivered on a next-day basis.

This business model generates attractive shareholder returns. Sales rose by 6% to £693m last year, while pre-tax profit rose by 7.3% to £38.2m. The group’s dividend rose by 8.9% to 22.55p and a special dividend of 8p per share was also paid, giving a total yield of almost 5%.

Headlam can afford to be generous — net cash rose by 19.8% to £52.6m last year. This means that about 10% of the group’s market cap is covered by surplus cash.

Obviously the big risk with this business is that it’s cyclical. A UK or European recession would probably cause sales to slide. But I’m attracted to Headlam’s strong cash generation and profitable business model.

For investors with a long-term view, I believe the shares could still be worth considering at current levels.

The post 2 growth stocks to buy and hold for 10 years appeared first on The Twelfth Magpie.

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Roland Head 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.

Improving performance

The company in question is solutions provider Accesso Technology Group (LSE: ACSO). It has reported that revenues for the 2016 financial year should be in line with expectations, but profitability is due to be higher than previous guidance. This strong performance has been achieved despite major and accelerated investment in product and infrastructure. This has been undertaken to support expansion into new geographies in order to expand long-term growth, while also investing in the recently launched Prism wearable device.

Upbeat outlook

In the current year, Accesso is forecast to record a rise in its bottom line of around 22%. In 2018, its earnings are due to rise by around 19%. This puts it on a price-to-earnings growth (PEG) of just 1.5, which seems fair given its long-term outlook. In fact, given the investment being made in the business in terms of new products and new geographies, it seems likely that its growth rate could remain at current levels over the medium term. In that case, it could realistically maintain its current valuation, which would mean a share price gain of 20% or more over the medium term.

Relative appeal

Of course, buying relatively small tech stocks such as Accesso can be somewhat risky. Clearly, they lack the size, scale and financial firepower of larger peers. However, they can also offer greater adaptability and a business model more responsive to changing consumer tastes and demand. In Accesso’s case, it seems to offer strong and consistent growth at a reasonable price, which can be hard to find within the tech sector.

For example, sector peer Iomart (LSE: IOM) is forecast to record a rise in its bottom line of 9% next year, followed by 2% in the following year. While this gives an average growth rate roughly in line with the wider index, the managed hosting and cloud services specialist trades on a price-to-earnings (P/E) ratio of 17.3. This equates to a PEG ratio of over three when combined with its forecast growth rate. That’s double the PEG ratio of Accesso, which indicates Iomart could be outperformed by its sector peer.

Clearly, Iomart is a high-quality business. However, due to its share price rise of 120% in the last five years, it now seems to be fully valued. Accesso still appears to have 20-plus upside, which makes it the better buy at the present time.

The post Why this growth stock has 20%+ upside after beating expectations appeared first on The Twelfth Magpie.

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Peter Stephens 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.

That’s why I’m keen to look at Iomart Group (LSE: IOM), Northgate (LSE: NTG) and RWS Holdings (LSE: RWS), each of which has a strong record of rising dividends and is reporting results today. 

Turbo-charged compounding

By reinvesting dividends back into shares we can compound our invested funds, but reinvesting a growing dividend into a growing business is like compounding with a turbocharger — it can be an efficient way to build your wealth.

I like the look of these three firms because they smaller than the popular companies we see in the FTSE 100, borrowings seem under control in each case and decent cash inflow supports profits.  A smaller business has more room to grow and that can lead to bigger dividend increases year-on-year.

All three firms today delivered positive results and upbeat outlook statements. RWS describes itself as the world’s leading provider of high-quality translation, intellectual property and language support services. Most desirable financial indicators moved firmly in the right direction with these full-year results and the directors pushed up the total dividend by 15%.

With its half-year results, light commercial vehicle hire company Northgate announced its new chief executive as it delivered results in line with previous expectations. The firm’s outlook is upbeat and the directors announced a 12% hike in the interim dividend.

Meanwhile, cloud hosting provider Iomart’s half-year results show double-digit increases in revenue and profit and City analysts following the firm expect the full-year dividend to come in 30% higher than last year’s payout.

High rates of dividend growth

There’s no doubt that these dividends are growing and I think a high rate of dividend growth can be more attractive than a high dividend yield with lower growth. Right now, at a share price of 287p, Iomart’s forward dividend yield runs around 1.6%, at 467p, Northgate’s is close to 3.8%, and at 313p, RWS’s sits at 2% or so.

There’s no sign of any stress for these dividends because the underlying businesses appear to be performing well. RWS, for example, says it’s continuing an unbroken series of dividend increases since the firm floated on the stock market during 2003. If these companies can go on to push dividends up like that in the years ahead, capital gains from their share prices could combine with ever-increasing dividend payouts to produce a very satisfactory total return for shareholders in the long run.

A focus on dividend growth can lead us to some of the stock market’s strongest businesses, I reckon. When considering the potential total investment returns from firms such as Iomart, Northgate and RWS, I think each one is capable of becoming one of 2017’s best income stocks. 

The post Iomart Group plc, Northgate plc and RWS Holdings plc could be 2017’s best income stocks appeared first on The Twelfth Magpie.

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• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
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Kevin Godbold 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.

Size And Scale

Of course, ARM and Micro Focus are relatively stable, large businesses with track records of growth. For example, in the last four years, both companies have grown their bottom lines in three of them and, at the present time, are in the process of rapidly increasing dividends per share so that investors can more directly partake in the company’s bottom line growth.

In fact, Micro Focus is expected to increase dividends per share by 24% next year, which puts it on a forward yield of 3.2%. And, while ARM’s yield is just 0.8% at the present time, dividend growth of 22% next year should help to improve the yields obtained by its investors. These increases show not only that the two companies are performing well in terms of profit growth, but also that their management teams are confident about their financial standing and, for long term investors, this bodes well.

Growth Potential

Clearly, there is much more to investing in technology companies than income prospects and financial stability. And, despite being somewhat ‘sensible’ investments in terms of having both qualities, ARM and Micro Focus also provide excellent earnings growth prospects, too. For example, ARM is expected to increase its earnings by 74% this year, while Micro Focus’ bottom line is due to rise by 18% in the current financial year.

Interestingly, both of these growth rates are ahead of Iomart’s forecast growth numbers, with it being due to post growth of 15% per annum over the next two years. This, though, is still twice the wider index’s growth rate and means that Iomart trades on a very appealing price to earnings growth (PEG) ratio of just 1. As such, its share price could continue its upward trajectory, and its shares are certainly not overvalued at the present time.

Looking Ahead

In addition, Iomart also offers an excellent track record, with it having delivered profit growth in three of the last four years, just like ARM and Micro Focus. Furthermore, Iomart’s 1.3% yield and 22% forecast dividend growth rate for next year provide evidence of its sound financial standing and, as such, it seems to offer an excellent mix of growth, value and long-term stability. As a result, teaming it up with ARM and Micro Focus in Foolish portfolios seems to be a sound move.

The post Is Iomart Group Plc The Perfect Partner For ARM Holdings plc And Micro Focus International plc In Your Portfolio? appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings and Micro Focus. 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 results seemed pretty reasonable to me, so I was surprised when the share price collapsed when the market opened, falling by more than 10% at one point.

The shares have since largely recovered, but this morning’s market reaction highlights the greater volatility that often characterises the shares of smaller companies.

In this case, I believe it’s also the result of Iomart’s failure to convert a 300p per share bid proposal into a takeover deal in August 2014. The shares now trade 26% below this level.

Some good news

The good news for Iomart shareholders is that they appear to own shares in a good quality company.

Iomart’s adjusted diluted earnings per share rose by 16% to 12.6p last year, in-line with analysts’ expectations. This puts the shares on a P/E of 17.6, falling to 15.2 in 2016 if the firm hits current forecasts.

Two of the firm’s key attractions are its profitability and strong cash generation. Iomart reported an operating profit margin of 18.5% last year. As a result, net cash from operating activities rose by 10.5% to £23.9m, with free cash flow of £8m, which seems to have been used to reduce debt.

Iomart has grown through regular acquisitions and is expected to deliver earnings per share growth of about 15% next year. Is this enough to justify a buy at current prices?

I’m not sure. This is a business that requires regular investment in new equipment and is prone to technological disruption and intense competition.

On balance, I’d only buy Iomart if it was a bit cheaper.

Is ARM a better choice?

However, many investors (including me) have said that ARM Holdings (LSE: ARM) (NASDAQ: ARMH.US) was too expensive to buy, and been proved wrong.

When I first started covering ARM in 2012, I though the shares looked too expensive to buy. They’ve since risen by 120% in just four years. Sometimes paying a premium for quality can deliver outstanding returns.

The question is whether Iomart has any of the characteristics that make ARM so valuable and consistently successful.

ARM vs Iomart

Iomart appears to be a leading and successful operator in the cloud computing market, but this is inevitably a business where competition will be intense and price sensitive.

My feeling is that ARM faces less hostile competition, as the capabilities of its market-leading designs are hard to emulate with cheaper alternatives.

ARM also has a second big advantage. The beauty of the firm’s business model is that it needs very few assets to generate the chip designs it licences to manufacturers. In contrast, Iomart needs to invest in new equipment regularly to ensure its services remain best-in-class.

ARM’s shares do reflect this rich appeal, trading on a 2015 forecast P/E of 36 and with a yield of less than 1%. However, ARM has so far been able to grow into its valuation, and could well continue to do this, given the growth in demand for internet-connected devices.

Ultimately, I believe Iomart and ARM are both good companies, but they’re both already quite fully valued.

The post Is Iomart Group Plc A Buy Or Should You Play It Safe With ARM Holdings plc? appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

Roland Head has no position in any shares mentioned. 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.