As the name suggests, growth stocks are the stocks of those companies that have the potential to surpass the overall market in terms of growth in due course owing to their future potential. On the other hand, value stocks are those stocks that trade at a price lower than their real worth. Analysing a growth stock, investors typically focus on the P&L and its growth projections, while for a value stock, the focus is largely on the balance sheet.
Growth stocks boast above-average earnings and are capable of registering growth at a faster rate than the overall economy, owing to which their price grows quickly as compared to the other stocks in the market. Thus, investors who wish to purchase growth stocks might have to pay more for each stock.
As the growth stocks tend to react faster to the market variations, it is very important to access the risk associated with these stocks for every investment.
Some of the features of a growth stock have been listed below.
- Higher PE ratio than the larger market;
- High earnings growth record;
- Tend to be more volatile than the broader market;
- Often considered as a riskier investment;
- Generally, do not pay dividends to shareholders.
Price of value stocks is low despite the strong fundamentals of the company like revenue, dividend, yield, earnings and profit margins. Investors in value stocks believe that the price of these stocks would increase eventually, demonstrating the true picture of the company’s health and potential.
Some of the features of value stocks are:
- PE ratio lower than the broader market;
- They are priced below peer companies in their industry;
- Generally, less volatile than the wider market;
- Make dividend payments to shareholders.
Value stocks are usually the stocks of established companies that have proven histories of financial performance. Value stocks take a longer time than growth stocks to witness increase in their value, thus investing in value stocks is suitable for long-term investors having the time and the patience.
Investing in both growth as well as value stocks provide the portfolio with higher returns and less volatility.
In this article, we would be discussing three ASX-listed tech stocks.
Iress Limited (ASX: IRE)
Iress Limited (ASX: IRE) offers IT solutions to financial market participants and wealth managers. The company’s software is being used by 9,000+ businesses as well as 500,000 users around the world. Moreover, the company employs a staff of around 1,950 people in regions including Asia-Pacific, North America, Africa and Europe.
Let’s look at its 1H FY2019 results for the period ended 30 June 2019.
The company, which is a consistent dividend payer since 2016, also declared an interim dividend of 16 cents per share.
- For FY2019, the company expects to register segment profit growth in the range of 6% to 11%; and,
- Periodic revenue and costs would depend on the timing of client projects. Beyond 2019, the company anticipates a continuation of significant industry change along with a climate of economic and structural uncertainty.
The stock of Iress Limited in the past 1 year has generated a return of 23.29%. By the end of the day’s trading on 6 January 2020, the closing price of the share was $13.330, down 1.64% from its previous closing price. IRE has a market cap of $2.37 billion, with approximately 174.92 million outstanding shares, PE ratio of 37.230x and annual dividend yield of 3.39%.
Integrated Research Limited (ASX: IRI)
Integrated Research Limited (ASX: IRI), based in New South Wales and listed on ASX in December 2000, provides performance management software for IT infrastructure, payments and communications.
During FY2019 ended 30 June 2019, the company registered strong results.
Strong growth in revenue was driven by the company’s operations in the European and APAC regions.
The company has made consistent dividend payments to its shareholders since 2016. The total dividend for FY2019 was 7.25 cents per share.
- The company would continue to focus on maintaining its competitive advantage in a world of connected devices via its continuing innovation through research & development.
- Growth of the company is driven by expanding capabilities in the existing markets and customers, sales and service capabilities into new geographic markets as they mature and adopt these core technologies, and by developing new products that open path for entry into new markets.
The stock of Integrated Research Limited in the past 1 year has generated a return of 86.25%. By the end of the day’s trading on 6 January 2020, the closing price of the share was $3.220, down 0.923% from its previous closing price. IRE has a market cap of $558.55 million, with approximately 171.86 million outstanding shares, PE ratio of 25.55x and annual dividend yield of 2.23%.
Link Administration Holdings Limited (ASX: LNK)
The market leading platforms of Link Administration Holdings Limited (ASX: LNK) manages financial ownership data & drives user engagement, analysis as well as insight via technology. The company provides a complete solution for companies, big asset owners and trustees around the world.
As a leading provider of technology-enabled administration solutions, the company develops its offerings as per the clients’ requirement. Since the company came into existence, it has been handling sensitive data of its clients in a secure & confidential manner. More than 7,000 employees support the company across 18 jurisdictions. Its clients include some of the largest superannuation funds in Australia plus some of the largest corporations in the world.
Fund administration and securities registration are its core businesses, accompanied by value added services such as digital solutions and data analytics.
The company has consistently provided its shareholders with dividend since 2019. The company in FY2019 ended 30 June 2019 provided a total dividend of 20.5 cents per share, in line with the previous corresponding year.
Let’s take a look at the company’s FY2019 results:
The company also declared an on-market share buy-back of up to 10% of equity.
In FY2020 and beyond, the company plans to focus on driving efficiency via cost & margin control and ensuing that its business operations are established to navigate regulatory headwinds.
The stock of Link Administration Holdings Limited in the past 1 year has generated a negative return of 12.22%. On 6 January 2020, the stock closed the day’s trading flat at $5.890. LNK has a market cap of $3.13 billion, with approximately 530.83 million outstanding shares, PE ratio of 9.820x and annual dividend yield of 3.48%.
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