2022 has been a tough time for tech stocks as global growth worries have surfaced. Cybersecurity business and cheap growth stock NCC Group (LSE: NCC) is no stranger to such weakness either. And I believe this represents a great dip-buying opportunity for me.
The threat of cyber attacks is growing and businesses are having to invest heavily in IT to protect themselves. This is in part due to a rise in state-sponsored attacks in recent years. It is also due to the rise of remote working which creates extra vulnerabilities that companies need to address.
The latter in particular gives tech stocks like this one plenty to get excited about, in my opinion. Latest Office for National Statistics data shows how rapidly office-only working models are falling out of favour. These showed the number of homeworkers who plan to continue working remotely up 12% between April 2021 and February 2022, to 42%.
Revenues move “substantially higher”
NCC Group is one business I’m tipping to thrive in the coming years as businesses seek to prevent possible disruption caused by online attacks. The FTSE 250 firm’s software escrow and verification services help businesses carry on in the event of a strike.
Trading remains extremely strong and it predicted last month that constant currency revenues would be “substantially higher” in the six months to May on an annual basis and versus the first half. It said this would be thanks to the acquisition of Iron Mountain’s IPM unit in 2021 and “accelerating Assurance revenue growth”.
Robust earnings growth tipped to continue
City analysts are expecting annual earnings at NCC Group to continue growing by double-digit percentages as its market opportunities grow.
They’re predicting a 13% bottom line rise for the financial year that’s just passed (to May). And they’re expecting yearly profits to improve by 20% and then 10% in fiscal 2023 and 2024 respectively.
I’m not surprised that the number-crunchers are quite so optimistic either. The acquisition of IPM has significantly boosted its position in North America. Its wide geographic footprint also gives it broad exposure to the growing global cybersecurity product market (NCC operates in the UK, mainland Europe, Asia and North America).
Too cheap to miss?
I think NCC is a particularly attractive buy following its share price falls in 2022. At current prices of 212p, the tech business trades on a forward price-to-earnings growth (PEG) ratio of just 0.8.
A reminder that any reading below 1 suggests a share could be undervalued.
The departure of chief executive Adam Palser next month provides some uncertainty. And with this comes risk. However, his replacement Mike Maddison — currently EY Club’s head of cyber security, privacy and trusted technology practice (EMEA) — is seen by many as a great pick to continue NCC Group’s growth story.
I think NCC could prove an inspired way for me to invest £10,000 today.