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Is it time to sell DWS Ltd shares?

The DWS Ltd (ASX: DWS) share price has been climbing over the last few months since it dropped to a $1.31 in late September.

DWS Ltd shares are now going for about $1.66 and, despite a mixed year in 2017, the company’s shareholders have benefited from returns exceeding 20 per cent over the past year.

So, is it time to sell?

For financial year (FY) 2017 DWS Ltd reported EBITDA of $26.2 million, up 3.2 per cent on the previous year.

The company also managed to pay its shareholders a dividend of 10 cents (fully franked) per share and paid off a significant portion of its debt.

DWS Ltd ended FY 2017 with bank debt of $15 million – a $9 million reduction of the company’s debt of $24 million for FY 2016.

The company also stated that it has since paid a further $1 million of its bank debt, bringing it to $14 million.

But it’s not all good news for the information technology services provider.

Although the company’s EBITDA was up and a significant portion of debt was paid, DWS Ltd’s revenue declined.

DWS Ltd, with a market cap of about $215 million, reported revenue of $137.4 million for FY 2017, down almost 5 per cent on the prior corresponding period.

The company seemed to attribute “a reduction in the number of IT consultants entering the workforce and a focus on costs by clients” as a key factor behind its year-on-year drop in revenue of about $7 million.

And while such market conditions are “expected to continue to put pressure on margins on traditional IT services work” it seems DWS Ltd will be among companies feeling the pressure.

While DWS Ltd stated that it will continue to look for acquisitions that will support its business model and contribute to growth for the company, among other strategies, it still may be a good time to sell.

As such, investors looking for exposure to the tech space should have a closer look at Altium Limited (ASX: ALU) or Nextdc Ltd (ASX: NXT).

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Motley Fool contributor Steve Holland has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium. 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 policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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