Are ARM Holdings plc, Laird plc and Quixant plc the best of the best tech stocks?
In the last 10 years, one of the best growth stocks in the FTSE 100 has been ARM(LSE: ARM). Its shares have risen by a whopping 593% during the period as it has quickly become one of the biggest and best tech stocks based in the UK.
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However, during recent months doubts have begun to emerge among some investors regarding ARM's growth rate. That's partly because it's becoming a more mature business, but also because Chinese growth has slipped and with ARM being a key supplier to the smartphone industry, its future arguably looks less certain than a couple of years ago.
As a result of this, ARM's shares have fallen by 10% in the last six months. Rather than making investors feel cautious, this fall in share price presents an opportunity to buy ARM while it has a wider margin of safety than it perhaps normally would. For example, it now trades on a price-to-earnings-growth (PEG) ratio of just 0.6, which indicates that even if earnings growth does slow to a degree, ARM's share price could reverse recent falls over the medium term.
Great tech stock
Also offering a bright future is fellow tech stock Laird(LSE: LRD). Its shares are somewhat unusual for a tech company insofar as they offer superb dividend potential. In fact, Laird currently yields 4% after having increased dividends per share at an annualised rate of almost 11% during the last five years. This shows that it's a relatively income-friendly stock, which bodes well for further dividend increases.
Looking ahead, Laird has the scope to increase dividends at a rapid rate. Not only are they covered 1.9 times by profit, but Laird's net profit is expected to rise by 15% in the current year and by a further 13% next year. This puts the stock on a PEG ratio of only 0.9 and with it being a high quality company with a dependable track record of growth, Laird seems to be one of the best tech stocks around.
Dwarf star
Shares in fellow tech sector company Quixant (LSE: QXT) have soared by 32% since the turn of the year as investors begin to price-in upbeat earnings growth prospects. The developer and supplier of computer systems is forecast to increase its bottom line by 57% in the current financial year, then by a further 24% next year. This puts it on a PEG ratio of only 0.7, which indicates that its shares could have much further to go in their stunning rise.
Clearly, Quixant is a smaller business than either ARM or Laird and so perhaps lacks the scale and robustness of its larger sector peers. However, with Quixant having a relatively wide margin of safety, it seems to offer a highly enticing risk/reward ratio and could prove to be a sound long-term buy.
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Peter Stephens owns shares of ARM Holdings and Laird. The Motley Fool UK has recommended ARM Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
