This Growth Stock Has Doubled in Value and Offers a Dividend

Growth stock Absolute Software (TSX:ABST)(NASDAQ:ABST) has doubled in value and offers a steady dividend for long-term investors.

| More on:
Money growing in soil , Business success concept.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Absolute Software (TSX:ABST)(NASDAQ:ABST) has more than doubled in value over the past year. While the stock has pulled lower by more than 15% from its record highs, it is still an exciting pick given its dividend yield and growth prospects in the cybersecurity space.

The ongoing sell-off in tech stocks might create an opportunity for bargain hunters. Here’s a closer look at Absolute’s prospects and current valuation. 

Growth prospects

The company continues to register tremendous growth amid the growing need for online protection solutions. Upon carving a niche for itself with cloud-based endpoint security solutions, Absolute Software might as well have positioned itself for tremendous long-term growth.

Over the past year, corporations deployed more cash to secure their employees’ devices, as the global workforce simultaneously went remote. This proved to be a windfall for Absolute Software. Its annual recurring revenue-growth rate has increased in three consecutive quarters. 

Now, as the economy reopens and people go back to the office, the demand for cybersecurity is likely to linger on. Russia’s unprecedented digital assault targeting numerous companies and agencies on U.S. soil sends a clear message: we’re in the middle of a cyber war. While the government must step in to offer protection, corporations need to make independent investments, too. 

That means cybersecurity companies like Absolute can sustain their momentum in a post-pandemic world. Accelerated growth in the education segment and growing international footprint should help strengthen the company’s revenue base. After posting a 16% year-over-year increase in revenues in Q4, Absolute Software looks set to post decent revenue growth of 12% this year.

Valuation

Trading with a price-to-sales ratio of 7.71, it’s clear that Absolute Software is still trading at a reasonable valuation compared to its peers. The company doesn’t have much debt on its balance sheet and has enough dry powder ($132 million in cash) to fuel acquisitions. 

All things considered, Absolute Software stock isn’t cheap but certainly isn’t as overblown as the rest of the tech sector. The fact that the company has lost nearly a third of its value this year makes it a reasonably priced growth stock. 

Absolute Software is an exciting pick for investors, eyeing opportunities in the cybersecurity space. In addition to core business and revenue growth, the company boasts of a forward annual dividend yield of 1.74%, presenting a unique opportunity for investors to generate long-term passive income.

Bottom line

As the global workforce went remote last year, Absolute Software saw a spike in sales. However, demand for cybersecurity tools should persist in a post-crisis world. The latest attack from Russia makes it clear that our digital footprint isn’t secure. Absolute should see steady growth for the foreseeable future. Meanwhile, the recent correction has made its stock much better valued. 

For long-term investors, this is starting to look like an intriguing opportunity. Keep an eye on it. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned.

More on Investing

Cogs turning against each other
Investing

Top 2 Stocks That Could Beat the Recession

Recession-resistant stocks like Dollarama (TSX:DOL) should be on your radar in 2022.

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

The 3 Best Dividend Stocks for Monthly Passive Income

These three dividend stocks are the best options for those seeking high passive income in the next few years in…

Read more »

clock time
Dividend Stocks

Got $10,000 to Invest? 1 Cheap TSX Stock to Buy Right Now

This top TSX dividend stock is finally on sale and has made some savvy buy-and-hold investors quite rich.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Want Monthly Passive Income? These TSX Dividend Stocks Are for You

If you want monthly passive income from TSX stocks, you have to do a little digging. I've given you a…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Bank Stocks

The Most Valuable TSX Stock Out There Is up 10% This Month!

This TSX stock is the best value stock out there, expanding even during a downturn and setting itself up from…

Read more »

ETF chart stocks
Dividend Stocks

3 International ETFs to Buy for a Diversified Portfolio

Some international markets may prove more resilient against economic downturns, and exposure to them may strengthen your portfolio during crashes…

Read more »

Payday ringed on a calendar
Dividend Stocks

TFSA Pension: 3 Canadian Dividend Stocks to Buy for Monthly Passive Income

These high-yield Canadian stocks look good to buy right now for a TFSA focused on monthly passive income.

Read more »

A worker uses a laptop inside a restaurant.
Tech Stocks

2 U.S. Stocks Canadian Investors Can Buy and Hold Forever

Blue-chip companies such as Microsoft and Coca-Cola are forever stocks that have the potential to beat the market in 2022…

Read more »