When investors think of technology stocks, they often turn to the US market, such is the dominance of the old FANGs, Tesla (TSLA:NASDAQ), Nvidia (NDVA:NASDAQ) and others.

This risks missing out on great investment opportunities right here in the UK, such as Computacenter (CCC), a company championed in Shares in 2019 when the shares could be bought for £12.10. 

This is a built in Britain, pan-European enterprise IT infrastructure supplier whose 20,000-plus staff support millions of end users in more than 70 countries worldwide. Operating in a space referred to as VARs, or value-added resellers, it sells full-service top-tier technology, capable of handling everything right through from installation to 24/7 remote technical support. Technology partners include AWS, Microsoft, Cisco, IBM, Adobe, Oracle, Google, Samsung and many more.

‘VARs are a key component of the UK’s IT supply chain, which help vendors access the market and end-users procure more efficiently,’ analysts at Liberum have said.

Computacenter is a robust, profitable, cash generative, dividend paying company on an attractive valuation. This was illustrated in recent 2022 results, with revenue up 29% to £6.47 billion, far ahead of market expectations of £5.99 billion, and GII (Gross Invoiced Income) up 31% to £9.05 billion.

Gross profit and adjusted pre-tax profit rose 9.1% and 3.2% to £947 million and £264 million respectively with margins coming under some pressure, largely understandable given the economic backcloth in 2022.

Unlike many tech companies, Computacenter has no trouble turning profit into cash, with operating cash of £295 million up from the prior year’s £278 million, allowing the company to comfortably spend £81 million on dividends and support bolt-on acquisitions.

Analysts widely anticipate that Computacenter will use its scale and balance sheet power to tighten its grip on many markets even if IT spending remains slower, particularly in the US, with market share gains likely. This outlook could improve further if inventory supply chains unwind as some expect through 2023, creating an opportunity to outperform current expectations and load the gun for higher dividends, possibly a special pay-out, something Computacenter has done many times before.

Taken all together, a 2023 PE (price to earnings) multiple of around 13 appears to undervalue the opportunity. The PE falls to about 12.5 in 2024. Return on capital employed was 19.2% last year and analysts forecast free cash flow per share way above EPS (earnings per share) at 196p. The dividend yield for this year is forecast at 3.2%.

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