Cyber security specialist

As an introduction, NCC is a cyber security firm that specialises in information assurance and ensuring that companies are compliant when it comes to their software licensing needs. This is currently a growing market as technology adoption is advancing.

So what’s the current state of play with NCC shares? As I write, they’re trading for 232p. At this time last year, the stock was trading for 270p. This is a 14% decline over a 12-month period.

It is worth noting that many FTSE stocks have declined as a result of recent macroeconomic conditions as well as the tragic events in Ukraine.

A FTSE 250 stock with risks

So let’s look at some potential pitfalls of buying NCC shares. First of all, the recent market pullback has seen tech stocks in general fall out of favour. It seems that investors prefer safer, more defensive options, whereas tech stocks are seen as riskier growth options.

Next, NCC helps other businesses from a cyber security point of view, but that does not mean it is not susceptible to an attack itself. After all, it possesses lots of information about many companies and their operations. I’m confident it has mechanisms in place to protect itself, but an attack could be devastating for its reputation, performance, and investor sentiment.

The bull case and my verdict

Now let’s take a look at the positives of owning NCC shares. To start with, NCC has had a favourable track record of performance in recent years. I am aware that past performance is not a guarantee of the future. However, looking back, I can see it has grown revenue and profit for the past four years consecutively. As mentioned earlier, the rising adoption of tech could support this trend in continuing.

With impressive performance growth, shareholder returns tend to follow. NCC shares would boost my passive income stream through dividend payments. The current dividend yield stands at just less than 2%. This is in line with the FTSE 250 average of 1.9%. I am conscious that dividends are never guaranteed. They can be cancelled at the discretion of the business at any time to conserve cash.

To summarise, I like the look of NCC Group shares. For me, the positives outweigh the negatives. The biggest attraction for me is the fact NCC is operating in a high-growth market with lots of potential ahead for it to leverage its already growing presence.

Although I cannot purchase every stock I like the look of, I would be willing to add NCC shares to my holdings. I believe they could boost my portfolio for a long time to come.

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.

According to PwC, a whopping 64% of UK businesses have experienced fraud, corruption, or economic crime during the past two years. This figure is beaten only by South Africa and is far above the 46% global average. And, once again, cybercrime was the most frequent type of fraud reported.

The rate of cyber attacks has declined from the elevated levels seen during Covid-19 lockdowns. However, it seems the problem will rise over the long term as normal life becomes increasingly digitalised and attacks from individuals and groups of hackers (including from state-sponsored operators) increases.

Risky business?

So I think NCC Group could be a great stock for me to buy for the next 10 years. This stock provides software escrow services which allow firms to continue doing business interrupted even if cyber attacks happen.

It’s important to note that companies like NCC are popular targets for cyber criminals. And this creates big risks for investors. A successful attack might significantly disrupt the stock’s operations. It could also do immense reputational damage that might affect future orders.

That said, I still believe the possible rewards of owning NCC shares more than outweigh this danger. Annual earnings here have grown by double-digit percentages recently and City analysts expect this trend to continue. For the financial years to March 2023 and 2024 earnings per share are tipped to rise 20% and 10% respectively.

These projections also mean that NCC offers excellent value (at least in my opinion) at recent prices. At 219p, this cheap UK share trades on a forward price-to-earnings growth (PEG) ratio of just 0.9. Any reading below 1 suggests a UK share is undervalued.

A cheap UK housebuilding share

As a lover of great bargains I’m considering buying Vistry Group (LSE: VTY) alongside NCC Group today. Rising interest rates pose a danger to housebuilders like this one as homebuyer affordability comes under pressure. But it’s my opinion that this threat is baked into Vistry’s ultra-low valuation.

At 900p per share, this cheap UK share trades on a forward PEG ratio of 0.6. This is created by City predictions that annual earnings will rise 12% in 2022.

The continued resilience of the housing sector is encouraging me to load up on Vistry shares today. According to Rightmove, average asking prices in the UK just saw their largest May increase since 2014.

8.7% yields!

What really grabs my attention with Vistry is the stock’s enormous dividend yields. For 2022 and 2023, these sit at 8.1% and 8.7% respectively at current share prices.

I believe that home prices will continue rising too, given the scale of Britain’s chronic homes shortage. It’s why I already own housebuilding shares and I’m tempted to add Vistry to my portfolio too. This particular builder’s average weekly private sales rate was up 15% between 1 January and 18 May.

I’d buy the stock to hold for the rest of the decade.

The prospect of a sharp economic slowdown threatens to harm business investment in all, or most, areas. This includes the amount spent on reinforcing IT systems from external threats.

Yet NCC Group could hold up strongly, in my opinion, given the huge costs a company faces if an attack happens. This is an area in which corporate spending could in fact remain pretty solid.

Government statistics show that 39% of British companies were hit by a cyber attack in the 12 months to March. This resulted in an average cost of £4,200. For just medium- and large-sized businesses the figure rose to a whopping £19,400.

A cheap UK growth share

NCC provides a range of cyber-security-related services such as creating security assessments and producing software escrow agreements. And City analysts expect earnings here to keep growing strongly over the medium term.

NCC’s earnings are predicted to increase 18% and 10% in the financial years to May 2023 and 2024 respectively. This follows the 15% increase brokers think the business will report in the outgoing fiscal year.

Pleasingly, these forecasts mean the company looks exceptionally cheap at current prices. At 207p per share, NCC trades on a forward price-to-earnings growth (PEG) ratio of 0.9. A reading below 1 suggests that a stock could be trading below value.

Finally, I also like this cheap UK share because — unlike many other tech shares which invest heavily for growth — NCC also provides a dividend to investors.

For the soon-to-begin financial year and fiscal 2024, yields here sit at a healthy 2.3% and 2.5% respectively.

Retail therapy

The near-term outlook for many UK retail shares is darkening as the cost of living crisis worsens. But it’s my opinion that niche retailers like fashion business N Brown Group (LSE: BWNG) will be better placed to weather the shock.

Through its Jacamo and Simply Be brands, N Brown is a major player in the fast-growing ‘plus-size’ market. What’s more, its JD Williams division caters to shoppers within the more affluent 45-65 age range. This could be a particularly useful profit boosting division for these tough times.

N Brown’s latest financials last week show how resilient trading its business model is. Sales at the ‘strategic brands’ mentioned above rose 9.9% in the 12 months to February.

A top penny stock

Despite the problem of intense competition, I think N Brown’s niche offer makes it a great buy. And especially so at current prices of 32.2p per share.

City analysts think the penny stock’s earnings will fall 17% year-on-year. This leaves the business trading on a super-low forward price-to-earnings (P/E) ratio of 5.6 times.

I think this valuation fails to reflect N Brown’s long-term profits potential as its key demographic markets grow sharply. I think the retailer is a cheap UK share worth serious attention today.

Energy and cyber security

NCC offers cyber solutions for potential risks relating to software and cloud computing, supply-chain risks and threat intelligence among many others. Its clientele includes Sennen, data operator for London Array (one of the world’s largest offshore windfarms), National Grid and NatWest. Considering energy security is now an extremely high priority for Western European nations, this is certainly a business that I would like to be in. Rishi Sunak’s Spring statement references a minimum increase of £1bn (3%) to defence spending this year and a focus on the mitigation of Russian exposure. I believe NCC is well positioned to gain more private and public business contracts should this be the case; however, there is a certain reliance on energy security being of huge importance in the future.

Consistency is key

Out of the entire FTSE 350 index, NCC has generated the most consecutive years of turnover growth at 17. Exacerbating the impressiveness of this statistic is the fact that NCC Group has the smallest market capitalisation out of the entirety of the constituents at just £581.8m. Even with macroeconomic periods of deterioration — such as 2008 and 2020 — and businesses being strapped for cash, NCC has still expanded operations, demonstrating that its services and products are of a high quality and are a necessity for corporate security.

The past performance is excellent; however, the market price of a security can be erased overnight if the future expectations are not robust. Unsurprisingly, NCC’s forecasts look brighter than ever with its annual turnover growth projected at 16% this year alongside cash flow growth of 23%. What makes the valuation even more appealing is the fact that NCC ranks first out of nine companies in the computer services subsector when analysing the companies’ PEG ratio, which is the price-to-earnings (P/E) ratio relative to earnings growth.

Directors want in

In financial markets, directors and executives of a company can sell shares for a variety of different reasons such as tax efficiency or additional income, but there tends to be only one incentive for them to buy shares in their company, and that is because they expect the price to rise meaningfully.

Back in January 2019, the directors at NCC bought approximately £185,000 of shares in the company at £1.30. Between then and September 2021, the share price rose 167%. Clearly, the directors know what they are doing regarding the performance of their own business.

Since then, the NCC share price has fallen by 43.4% with no tangible negative news or downturn in business. In October the directors executed over £40,000 in options and purchased over £50,000 in stock at £2.16 per share. Today’s price represents a 12% discount to that.

Assuming business carries on as normal with the rise in defence spending, NCC could have a great opportunity on its hands. Only time will tell if it can execute upon it. Personally, I’m holding off just for now to see how the situation in Ukraine develops and whether cyber and energy security remain topics of public interest.

A top cyber security share

The amount that businesses, governments and other organisations are spend on cybersecurity is soaring. British government data released this week showed that 1,800 UK tech firms created total annual revenues of £10.1bn in 2021. This was up 14% year-on-year.

NCC Group (LSE: NCC) is one company that’s benefiting from this rapidly-expanding market. Latest financials showed revenues up 7.2% in the six months to November at constant currencies (and excluding its recent acquisition of Iron Mountain’s IPM business).

Cybersecurity-related expenditure isn’t just soaring in Britain, of course. Electronic attacks are a global problem and NCC’s broad geographic footprint is allowing it to exploit this booming market to the full. The e-warfare specialist operates in Europe, North America and Asia Pacific, and it’s taking steps to boost its overseas business too. Indeed, the $220m IPM acquisition last July gives it vastly better scale in North America.

A cheap UK tech stock

NCC provides a wide range of security and risk mitigation services to organisations. From providing protection from cyber attacks and security assessments to drawing up software escrow agreements, the tech giant’s operations are essential as the digital revolution takes off.

My only concern for NCC is the ever-present threat of systems failure. This could have a significant impact on the company’s reputation and by extension on future sales. That said, I still think this cheap UK stock’s low price makes it an attractive stock for me to buy.

City analysts think NCC’s earnings will rise 20% and 14% in the next two financial years (to May 2022 and 2023 respectively). As a result, the company trades on a price-to-earnings growth (PEG) ratio of just 0.8. Any reading below 1 suggests that a stock could be undervalued.

A FTSE 100 stock to buy

On paper it seems that Ferguson’s (LSE: FERG) shares also offer terrific value today. Forecasters think earnings at the plumbing, heating and air conditioning specialist will jump 20% this financial year (to July 2022) and by an extra 6% next year. This leaves it dealing on a forward PEG ratio of 0.9.

I like Ferguson as it generates 95% of its profits from the US. Its massive exposure to the world’s biggest economy could help it to generate large profits as the post-pandemic recovery continues. In particular, residential construction rates look set to rise strongly, while President Biden’s $550bn infrastructure spending bill could boost non-residential building too.

It’s worth remembering that rising interest rates could cause some turbulence for Ferguson’s profits. New housing projects dropped 4.1% in January, which some believe could reflect recent action by the Federal Reserve. That said, as a long-term investor I still think this FTSE 100 share has a lot to offer me. And especially as it rapidly grabs market share from its competitors.

Cyber security boom

NCC Group is an information assurance specialist, based in Manchester, UK. It helps ensure that businesses are compliant with their software licensing and assists with cyber security.

As I write, NCC shares are trading for 188p. At this time last year, the shares were trading for 265p, which is a 29% decrease over a 12-month period.

Macroeconomic issues have placed pressure on FTSE 250 stocks in recent times. Growth stocks in particular have experienced a huge sell-off. Investors have reverted to defensive options given current uncertainty. I believe this has caused issues for NCC’s share price in recent months.

FTSE 250 stocks have risks

One of NCC’s burgeoning divisions is its cyber security work. This is arguably what the business is best known for too. There is always the threat that NCC itself could come under threat from a cyber security attack. This could be catastrophic and cause irreparable damage to its reputation. This would, in turn, negatively affect performance, investment viability, and any returns.

Recent macroeconomic issues have caused many tech growth stocks to slump. No one can accurately predict how long these issues will last and how long tech stocks may be out of favour. Could this be a short-term or long-term issue? There is a very real risk that NCC shares could be suppressed for some time due to factors out of its control.

Why I like NCC shares

NCC has a good track record of performance. I do understand that past performance is not a guarantee of the future, however. Looking back, I can see the FTSE 250 incumbents revenue and gross profit has increased year on year for the past four years.

Coming up to date, city analysts believe NCC’s earnings could rise as much as 25% in the financial year to May. This would leave NCC trading on a forward price-to-earnings growth ratio of 0.7. Any reading below 1 usually indicates a stock is undervalued. It is worth mentioning these are just forecasts and may not come to fruition.

NCC is a respected name in the cyber security market. Despite the current tech sell-off, evolving technology, the digital transformation, and the threat of cyber security that comes with all of this means NCC is operating in a potentially highly lucrative growth market in the years to come. I believe this will help boost performance growth and returns.

NCC shares would also make me a passive income from dividend payments. I do understand that dividends can be cancelled at any time, however. NCC’s current yield stands at 2.4%. The FTSE 250 average yield is just under 2%.

Overall, I believe NCC shares are cheap at current levels. With over three decades experience as well as a good track record of performance, I believe the coming years could be a lucrative time for it. The recent tech sell-off doesn’t concern me. I invest for the long term and I’d add cheap NCC shares to my holdings now and keep hold of them for a long time.

A cyber security star

Tech stocks that help companies, governments and other organisations protect themselves against cybercrime look set to thrive this decade. The growth of homeworking and the e-commerce boom due to Covid-19 has supercharged the number of cyber attacks over the past couple of years.

The tense geopolitical landscape threatens to worsen the situation further with state-sponsored cyber attacks becoming the norm.

Comments from the National Cyber Security Centre (NCSC) illustrate the scale of the problem. The centre has just urged UK organisations “to bolster their cyber security resilience in response to the malicious cyber incidents in and around Ukraine”.

The NCSC says that recent cyber attacks in Ukraine “are similar to a pattern of Russian behaviour seen before in previous situations,” prompting this fresh warning.

As both large- and small-scale cyber attacks become commonplace, increased investment is required in software to repel intrusions. This is why I’m considering investing in NCC Group (LSE: NCC).

This UK share provides a wide range of services that help thwart cyber criminals. From carrying out security assessments and providing training to producing software escrow agreements, NCC has its fingers in a number of pies.

City analysts think NCC’s earnings will rise 25% in the financial year to May. This leaves the company trading on a forward price-to-earnings growth (PEG) ratio of 0.7. A reading below 1 suggests that stock could be undervalued.

Sure, NCC could suffer untold reputational damage if a failure of its security systems occurs. Given the nature of its business such an event could prove catastrophic for future sales. However, NCC has been around for three decades and so clearly has a great track record on this front. This gives me extra confidence as a potential investor.

A cheap stock for the shipping boom

I’m also considering buying shares in Braemar Shipping Services (LSE: BMS) today. The world’s shortage of vessels is sending charter rates through the roof and shipbroking firms like this are reaping the rewards. Braemar also provides financial and logistics services to the global shipping industry.

Shipping rates are ballooning because of a tightening supply of vessels. The Covid-19 economic rebound is supercharging demand for ships of all classes. At the same time, a shortage of orders for new vessels in recent years has left a paucity of available seaborne craft.

Some analysts are predicting that “the average cost of shipping this year will be higher than ever before” as the crunch goes on. Braemar plans to double the size of its shipbroking business to exploit these favourable conditions.

City brokers are expecting earnings at Braemar to shoot 22% higher in this financial year (to February). This leaves the shipping giant trading on a forward PEG ratio of 0.5.

Earnings at the business could suffer if the economic recovery runs out of steam. But from a long-term perspective, I think this cheap stock remains a top buy.

#1: essential services

My first pick is Keywords Studios (LSE: KWS). This Dublin-based firm provides a wide range of specialist services to the video games industry. These include audio service, graphic design, player community management and much more. I see these as major growth sectors as we spend more of our lives online.

Keywords has been expanding rapidly in recent years by combining acquisitions with in-house growth. This can be a difficult strategy to do well, as there’s a lot to go wrong. Any disappointments could see Keywords’ shares slump — but results so far have been impressive.

Keywords Studios’ sales and profits have risen by an average of 45% per year since 2015. Broker forecasts suggest this pace could slow in 2022, but the company’s new chief executive has already said he expects results this year to be “at the upper end” of current forecasts. I think a further upgrade is possible.

This stock isn’t cheap, which is a risk, but I would buy Keywords Studios for my portfolio as a long-term play on metaverse growth.

#2: a metaverse security stock

Cyber crime is already a huge risk for anyone (or any company) that is active online. In my opinion, these risks are only going to get bigger as the metaverse evolves. Anti-virus protection won’t be enough. Businesses will need a much broader range of security-related services.

One company that already operates in this area is NCC (LSE: NCC). This £680m, Manchester-based business provides a full range of security and “risk mitigation” services for businesses. These include security assessments, training, incident response and compliance certification. The big risk facing NCC, of course, is that it could fall victim to cyber crime itself. I’d imagine this might destroy its reputation as a trusted advisor.

The NCC share price has pulled back since the start of this year, in line with the wider tech slump and many of the risks affecting tech stocks are the same for NCC. I reckon this could be a buying opportunity. NCC shares now trade on 18 times forecast earnings, with a 2.1% dividend yield. That doesn’t seem expensive to me, for a business that’s expected to deliver earnings growth of around 15% for the current year. I’d consider buying at this level.

#3: superfast networks

One area where the metaverse is expected to drive growth is virtual and augmented reality. Delivering this kind of service needs fast and reliable networks. That’s where my final pick comes in.

Calnex Solutions (LSE: CLX) specialises in “test and measurement solutions for the global telecommunications sector”. It’s a recent addition to the UK market that’s impressed me considerably so far, with a track record of growth, 20% profit margins and owner-management.

One risk for shareholders is that Calnex only listed on the stock market 15 months ago. I think there’s some risk of a slowdown after sales rose by 20% last year. However, long term I don’t think this should matter.

Founder Tommy Cook expects cloud computing and 5G mobile to create new opportunities. I agree. I’d be happy buying a few Calnex shares today to tuck away for the next decade.

Demand for renewable energy stocks like this is shooting higher as the concept of ‘responsible investing’ takes off. It’s a phenomenon I think could underpin strong share price growth as concerns over the climate emergency steadily grow.

TEEC splashes the cash on low-carbon energy projects across the UK. Its most famous investment is perhaps the acquisition of combined heat and power (CHP+) assets on the Isle of Wight. But it’s steadily building its footprint in the field of hydroelectric power too and late last month spent £26.6m to snap up a cluster of water-based power projects in Scotland.

The UK government has put ‘green’ energy at the heart of its industrial strategy for the next decade. And TEEC could be well-placed to capitalise on such political will. However, it’s worth remembering that a changing of the guard in Westminster could have serious ramifications for shares such as this.

A cybersecurity star

Cybercrime is an increasingly-large problem for individuals and companies all over the globe. As a consequence spending to prevent online attacks is going through the roof. Analysts at Researchandmarkets.com think the global security industry will be worth a staggering $539.8bn by 2030. That compares with the $183.3bn it was estimated at last year.

NCC Group (LSE: NCC) is a cheap UK share I’d buy to make money from this booming sector. It’s been no stranger to profits upgrades in recent months. And in early November it described trading since the beginning of October as “solid”.

News that its acquisition of Iron Mountain’s Intellectual Property Management (IPM) business in June is progressing well could help NCCs share price recover after recent heavy weakness. At 231p per share, NCC has basically lost all the gains it accrued during the past 12 months. However, signs of problems with integrating its new unit could conversely see the software business extend its slide.

Virtually brilliant

I invested in Keywords Studios — a provider of software development services — last year to capitalise on the booming video games market. I think motion capture specialist Oxford Metrics (LSE: OMC) could be another way to effectively ride this train. Trading at its Vicon division is extremely strong, thanks to what it describes as a “buoyant” games sector, and in particular the adoption of Virtual Production by various large production studios.

Virtual Production allows developers to go about their business in both the real and digital worlds. It’s complicated and clever stuff, but all I need to know from an investment perspective is that it’s also lucrative business.

Revenues at Oxford Metrics soared almost 18% in the year to September, to £35.6m. I’d buy this cheap UK share despite the threat posed by the high levels of competition in the tech sector it operates in.