Buyers swarm over Computacenter shares

Up 67% in 2019, this fast-growing star stock is boosted by core tech drivers like cloud computing.

A year to remember for Computacenter (LSE:CCC) investors was topped off today when shares in the IT infrastructure services firm surged to their highest level since the dotcom boom.

An unscheduled trading update, in which the company said 2019 results should be well ahead of current market expectations, provided the trigger for the latest 8% share price rise.

FTSE 250 index-listed Computacenter, which is one of the longest-standing members of the London stock market, had started the year at close to 1,000p after a re-rating of the tech sector knocked sentiment towards the end of 2018.

A steady performance since then has taken the Hatfield-based company beyond where it was in July 2018 prior to that sell-off, with this afternoon's peak of 1,662p the highest since 2000.

Source: TradingView Past performance is not a guide to future performance

Despite this strong share price performance, analysts at Investec Securities predict a further upside for shares to 1,700p based on a forward price/earnings multiple of 17 times.

They said:

“The stock remains our core value pick, trading at relatively modest multiples versus the sector but displaying reasonable growth and strong cash flow metrics combined with the potential of further modest forecast momentum.”

Investec has now upgraded its forecast for 2019 profits by a combined 10% over the year, including by 3.4% after today's update showed continued momentum from both established businesses and newly acquired operations in the United States.

Computacenter adds that visibility is also starting to improve on December trading, which tends to be the company's busiest month due to end-of-year activity by customers renewing software licences or updating or replacing kit purchased a year earlier.

The company admits there's still a significant amount to do this month, with further details on performance expected in an update on 23 January. Investec thinks that sales for the year will reach £5.16 billion, with pre-tax profits of £143.1 million compared with market consensus of £136.2 million. The broker predicts earnings per share of 90.1p, rising to 92.6p for 2020.

The improving performance comes as the company benefits from the core tech drivers of digitisation, cloud, security and network capacity improvement. Computacenter advises organisations on their IT strategy, while also helping them to optimise performance, and manage their infrastructure.

Concerns remain about the wider economic picture, which has previously impacted customer IT programmes in the automotive, mechanical engineering and pharmaceutical industries in the company's largest market of Germany. These trends, however, have been offset by ongoing investments from the public sector.