The sell-off in technology stocks since the September 2021 peak as the markets rotate out of growth and into value picks has given DIY investors plenty to chew over.
Many UK tech companies have seen valuations hammered, with share prices falling by up to 40% with no meaningful change to earnings, said Canaccord Genuity analysts in a note to clients on Tuesday (1 February 2022).
This, Canaccord believes, has created an opportunity to buy into high-quality names trading meaningfully below their historic seven-year average PE (Price to earnings) multiples.
The research flagged identity verification and anti-fraud technology company GB Group (GBG:AIM) as a great example.
RETHINKING VALUE
‘Having taken some time to digest the expensive Acuant acquisition, we believe investors will appraise GB again for continuing to deliver reliable organic low-to-mid teens percentage organic growth benefiting from secular demand for identity verification solutions,’ said Canaccord.
They calculate that the stock’s current 2022 calendar year PE of approximately 27 ‘sits at the low end of the historic range.’
The Canaccord analysis finds that cyber security and escrow manager NCC (NCC:AIM) and utility payments play Paypoint (PAY) in a similar boat, on current year PEs of 16 and 12 respectively.
Canaccord also identified digital content management firm RWS (RWS:AIM) and compound semiconductors wafer maker IQE (IQE:AIM) as ‘trading near trough multiples.’
