The Motley Fool

3 small technology growth stocks for your watchlist

All investors can imagine the wealth they could have created for themselves had they purchased shares in leading technology companies such as Microsoft Corp or Amazon.com Inc when they first floated.

While Australia may not be home to global software heavyweights, the ASX does boast a number of niche software providers which are very profitable and have been strong performers for shareholders.

Importantly, despite not being household names, the following three innovative companies are all global businesses which provide scale and scope for future growth.

These three tech stocks could be worth keeping an eye on:

GBST Holdings Limited (ASX: GBT): Is a leading software provider to the financial services industry with a focus on financial services transaction processing and asset administration. The group’s leading product is called GBST Shares and is the most scalable and widely used middle and back office equities system in Australia. This software helps stockbrokers and clearers to manage and execute transactions with the ASX.

Over the past five financial years (FY), cash earnings per share (EPS) have risen from 15.2 cents per share (cps) to 21.5 cps, while the share price has soared from 98 cents at the end of FY 2010 to $3.15 at the end of FY 2014. With GBST reporting a strong rise in its interim cash profit to 13.4 cps, the share price has enjoyed continued support with the stock currently trading at $6.40 – providing a massive 6-fold return to long-term shareholders.

Hansen Technologies Limited (ASX: HSN): Is a global provider of customer care and billing software which is utilised by the Energy (electricity, gas and water), Pay TV and Telecommunication sectors across over 40 countries.

Over the last five financial years EPS have expanded from 5.3 cps to 9.2 cps, while the share price has rallied from 41 cents to $1.27. Post 30 June 2014, Hansen has reported 20% growth in EPS to 5.4 cps for the half and the share price has trended higher to currently trade at $2.34.

Integrated Research Limited (ASX: IRI): Provides performance management solutions based on its ‘Prognosis’ software to a range of customers including those operating in infrastructure, unified communications and payments.

The group has expanded its new license sales from $18.4 million in FY 2010 to $28 million in FY 2014. This growth has helped Integrated Research expand its profits from $5.4 million to $8.5 million over the same time period. The profit growth has translated into share price appreciation with the stock increasing from 40 cents at 30 June 2010 to 99.5 cents at 30 June 2014. Thanks to continued profit growth in the most recent half – new licenses leapt 43% to $19.7 million and profits jumped 67% to $7.5 million – the share price has continued to increase with the stock currently trading near the $2 level.

While there are lot of positive aspects to these three companies, conservative, risk averse investors may struggle to feel comfortable paying the current prices being asked for these stocks, which is one reason the following stock recommendation is so appealing…

5 stocks under $5

We hear it over and over from investors, "I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I'd be sitting on a gold mine!" And it's true.

And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!

*Extreme Opportunities returns as of June 5th 2020

Motley Fool contributor Tim McArthur owns shares in Hansen Technologies Ltd.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policyThis article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.”

Related Articles...