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3 stocks shooting into the cloud 

Australia may not have the Nasdaq cloud heavyweights of Google, Microsoft and Amazon (through its highly profitable Amazon Web Services), but it does have some home-grown success stories. 

Gartner, the IT research group, is predicting global growth in cloud services of over 15% per year over the next 3 years as more and more businesses move their data and applications to off-site data centres. 

Here are my 3 favourite cloud stock ideas. 

Macquarie Telecom Group Ltd. (ASX: MAQ) 

Despite its name, Macquarie Telecom is not just another telco delivering just voice and mobile services.  

It is focussing more and more on delivering secure cloud services, particularly to government, where it now derives more than 50% of its earnings. It has invested heavily in building the required infrastructure, and this has started to pay off with its profit increasing 214% over the last year. 

It has no debt, a P/E ratio of 22,  and a dividend yield of 3.3%. 

NextDC Ltd (ASX: NXT) 

One of the very first data centre operators in Australia with sites in all of the major cities.  

Consistently NextDC has been delivering growth and earnings, with revenue last year growing 21%. There is no sign of a drop off in demand for its services with its brand new Sydney S2 data centre selling out of its available space before it has been completed. 

But with a P/E ratio of 98 and no dividend, I would be waiting for a pullback in price before buying 

Citadel Group Ltd (ASX: CGL) 

Another hybrid company, mixing software services and cloud offerings. Based in Canberra and mainly focussed on government, Citadel has grown rapidly, mainly by acquisition, since listing on the ASX in 2014. 

As well as cloud services Citadel is focussed on developing software for the health sector and for the security services. 

With a P/E ratio of 25 and a dividend yield of 2% Bell Potter named it one of its top 12 stocks for 2018. 

Foolish takeaway 

All three stocks offer great opportunities for growth over the coming years. If I was to buy one today it would be Macquarie Telecom, its growing profit, combined with a reasonable dividend, puts it in a strong position over the next five years. 

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

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