So far, 2025 has proved a miserable year for tech stocks. But Softcat (LSE:SCT) sprung back to life today (Wednesday) after the FTSE 250 share upgraded profit expectations for the full year.
At £18.18 per share, Softcat’s share price is up 12% in midweek trading, and back within striking distance of last June’s record peaks of £18.55.
Like other tech shares, the information technology (IT) specialist remains at the mercy of broader economic conditions and potentially crushing global trade tariffs.
But given its strong momentum, should investors consider buying Softcat shares today?
Record profits
Softcat — an expert in multiple IT segments including networking, cyber security, and cloud computing — saw gross invoiced income jump 19.3% in the six months to December, to £1.51bn. Revenue, meanwhile, rose 16.8% over the period, to £545.6m.
The company says these increases reflected “broad-based success across technology areas and customers“. Its customer base rose 1.4% over the period to around 10,300.
Profits also hit new record half-year peaks, with gross profit and operating profit up 12.1% and 10.4% respectively, at £220.2m and £73.7m.
This estimate-topping performance means Softcat today upgraded its full-year forecasts.
For the 12 months to June, it says “we continue to expect to deliver another year of double-digit gross profit growth… with operating profit growth now expected to be low double-digit, up from high single-digit previously“.
Room for growth
Softcat’s momentum remains impressive despite the challenging economic backcloth. Its success has been helped by ongoing recruitment — and especially in its technical, specialist, and sales support departments — to nurture relationships with existing customers.
Group head count grew 6% in the first half, and Softcat is tipping full-year growth of 6% to 8%.
Encouragingly for investors, Softcat has said it is targeting “further targeted strategic investment to underpin future growth“. A strong balance sheet gives the company plenty of scope to flex its muscles and grow staff numbers.
Cash conversion rose to 110.9% in the first half from 101.1% a year earlier. This in turn meant cash and cash equivalents increased by £28.5m over the period, to £141m.
Softcat’s decision to raise the interim dividend 4.7%, to 8.9p per share, further underlines its strong financial foundations.
Expensive but exceptional
Softcat, then, clearly has the wind in its sails. But it’s important to consider that its share price’s high valuation has increased further following Wednesday’s jump.
City analysts think group earnings will rise 8% in financial 2025, meaning the firm trades on a forward price-to-earnings (P/E) ratio of 28.3 times. That’s more than double the FTSE 250 average, and could leave Softcat shares vulnerable to a correction if market jitters resurface.
Yet despite this, I believe the business is worth serious consideration from long-term investors. Given its strong record of success across the public and private sectors, and expectations of further growth in the digital economy, it’s still one of London’s most attractive growth shares in my book.
This post was originally published on Motley Fool
