NVIDIA (NASDAQ:NVDA) shares remain very popular with UK investors. However, I have my eye on something a little closer to home.
More specifically, I am looking towards a FTSE 250 technology participation that, like Nvidia, has a brilliant track record of beating market estimates.
Its shares have risen 81% over the past five years and 543% over the past decade. And I think there is still a lot to do as the digital revolution advances.
I'm talking about soft cat (LSE:SCT), a stock that just released more blockbuster trading numbers. Its shares were last up 13% on Thursday (Oct. 24).
The forecasts are beaten again
Softcat offers a range of technology services and is an expert in fields including cloud computing, IT infrastructure, networking and cybersecurity.
Today's results showed that gross billed revenue rose 11.3% in the 12 months to July, to £2.85bn. This pushed operating profit 9.3% higher to £154.1m and slightly above City estimates.
Gross profit rose 11.7% year-on-year to £417.8m.
New records
Softcat said its record result reflected “Further development of our technology and service proposition as we continue to scale, making it easier for customers and suppliers to do business“. It also said the numbers from last year “Industry trends (reflected), including data and artificial intelligence.“.
The company is effectively growing its employee base to capitalize on such opportunities, as these results show. Its workforce increased by 14.3% over the last year.
Finally, Softcat said its cash conversion had increased to 95.9% from 93.2% in financial year 2023.
This led it to increase the annual dividend by 6.4% to 26.6p. It also increased the special dividend year on year, to 20.9p.
bright perspective
Looking ahead, Softcat said that “We expect to achieve another year of double-digit gross profit growth along with high single-digit operating profit growth.“.
I'm not surprised by the company's optimism. He has proven adept at increasing sales with existing customers, as well as adding new customers to his books.
As a potential investor, I am also encouraged by its exceptional cash generation and strong balance sheet. This gives it room to continue investing in expansion to capitalize on its growing markets.
What about Nvidia?
Now don't get me wrong. In my opinion, Nvidia remains one of the fastest growing stocks.
It's not just a big play in the artificial intelligence (ai) revolution. Sales of its graphics processing units (GPUs) could take off as the metaverse, quantum computing, gaming and data center segments grow.
However, the chipmaker also faces significant threats, such as potential supply chain issues, an economic slowdown, growing competition, and rising trade tensions between the United States and China.
However, in my opinion, these threats are not factored into Nvidia's stock price. Today it trades with a sky-high forward price-to-earnings (P/E) ratio of 50.8 times.
Softcat is also vulnerable to the economic outlook and increasing competition. It is also more reliant on the low-growth British economy to boost revenues.
However, I think your assessment is much more reasonable in light of these dangers. In fact, its forward P/E multiple is considerably lower than Nvidia's, at 26.7 times.
In fact, given its long history of solid earnings that beat forecasts, I think Softcat stock could be a bargain for my portfolio. If I had money to spend on technology stocks today, Softcat would be at the top of my list.
