While many inexperienced investors may think that investing in small technology companies is like playing a game of roulette, there are in fact numerous quality and profitable ASX-listed technology companies that are growing profits year-on-year. The two companies outlined below have a track record of profit growth and also look set for future growth – and at a reasonable price.
1. Hansen Technologies Limited (ASX: HSN)
Hansen Technologies develops, implements and assists in maintaining a wide range of customer support and billing solutions for service providers in the energy, pay TV and telecommunications sector. Impressively, the group's client base is global in nature and extends to more than 40 countries.
Hansen Technologies specialises in proprietary complex billing solutions, which is critical software for businesses to ensure the billing process is efficient and reliable. The software has a long service life which provides a predictable and stable revenue stream.
Hansen has made a profit every year for the past decade and a strong half-year result saw the company report net profit up 89% on the prior period, with operating revenue jumping by 54%.
Since 2007, Hansen has returned $53 million to shareholders through dividends and capital returns. The stock currently yields an attractive 5% dividend. Hansen also has a strong balance sheet and no debt. Analysts have forecast earnings per share growth of up to 60% for the FY14 year, and therefore the company's current price earnings ratio of 17 times looks cheap.
2. PS&C Ltd (ASX: PSZ)
PS&C listed on the ASX in December of 2013 and since then it has traded below its IPO price of $1, with the share price currently sitting at 74c. It is likely the sell-off that has occurred since the company listed was a result of negative market sentiment towards the technology sector as a whole as opposed to the performance of PS&C.
PS&C is a information and communications technology (ICT) company which services a range of government and corporate organisations, including Toyota, Schweppes, Telstra and the NSW Government. PS&C has three business units which are 1) people 2) security and 3) communications. The company is set to benefit as the demand for ICT services in Australia increases as large corporates and governments undertake major cost transformation projects.
Analysts have a buy recommendation of $1.15 on the stock which represents 55% upside from the current price. Furthermore, the stock currently trades on a very low price earnings ratio of approximately 8 times FY14 forecast earnings. With double-digit growth in earnings per share forecast in FY15, it appears PS&C is flying under the radar of investors.
