Technology stocks

Two UK tech stocks that are long-term blue chip stocks

The UK tech industry has grown in recent years, particularly in trending technologies including fintech, AI and cybersecurity.

Kainos Group (GB:KNOS) and Softcat (GB: TBS) are two such stocks that have traded lower over the past year but have strong potential for revenue growth. Their dividends are also above the industry standard.

In such scenarios, we can use the TipRanks stock filtering tool to check some industry-specific stocks. This tool can help you see the overall performance of stocks based on particular criteria or any sector.

Let’s see these stocks in detail.

Kainos Group

UK-based software company Kainos Group provides technology solutions for digital transformation.

In 2022, the company recorded revenue growth for the twelfth consecutive year. In May 2022, the company released its annual results for the year with a 29% growth in revenue to £302.6 million.

Bookings for the year increased by 35% to £349.8m, from 258.8m in 2021. These figures were driven by strong consumption growth across all segments.

Customer approval rate remains high at 98% with a 34% increase in revenue from existing customers. In the current inflationary environment, companies are constantly looking for solutions that can help them reduce costs and maintain profitability.

Shares of the company have generated a whopping 203% return over the past three years. This is risky given the future magnitude of share price growth. However, the stock is down nearly 25% in the past year and this creates a great buying opportunity as the potential for revenue and earnings growth is huge.

City view

According to TipRanks analyst rating consensus, Kainos Group stock has a Moderate Buy rating from three analysts. It includes two buy recommendations and one hold recommendation.

The Kainos Group price target is 1,275p, which represents a -7.07% change in price from the current level. The price has a low and high prediction of 1,200p and 1,350p, respectively.

Softcat

Softcat provides third-party IT solutions and services to enterprises and the public sector in various areas such as cybersecurity, data and analytics, software licensing, networking and security, etc.

SSoftcat’s stock is down 36% over the past year. This is mainly about the correction that occurred in prices after the huge growth during the pandemic.

In its latest half-year results released in March 2022, Softcat’s revenue increased by 33.6% and operating profit by 12.4%. The performance was mainly supported by strong growth in the number of customers in all segments and cost control measures despite supply disruptions linked to component shortages.

The company is optimistic about its annual earnings and expects them to be in line with expectations.

With the growing demand for flexible working solutions and more and more businesses going digital, Softcat is well positioned to take advantage of this and further increase its market share.

What is the forecast for the stock?

According to analysts’ rating consensus from TipRanks, Softcat stock has a moderate buy rating based on a buy recommendation and a hold recommendation.

The SCT stock forecast is 1,640p, 29% higher than the current level. The price has a forecast low and high of 1,640p.

Conclusion

Both tech companies continued their track records and saw strong revenue and profit growth across their multiple segments.

The results surely demonstrate growing consumer demand for their services and strong commitment to serving customers effectively.

Disclosure