The Micro Focus share price has doubled in a month. I’d keep buying

first_imgSimply click below to discover how you can take advantage of this. See all posts by Roland Head Image source: Getty Images Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. The Micro Focus share price has doubled in a month. I’d keep buying Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Micro Focus. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. “This Stock Could Be Like Buying Amazon in 1997” I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.center_img Enter Your Email Address I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Our 6 ‘Best Buys Now’ Shares The Micro Focus International (LSE: MCRO) share price has doubled in just one month. The shares are up by 15% today as I write, even though the software company hasn’t issued any new trading information.Is this the start of a stunning comeback for this former FTSE 100 share, which was valued at more than £10bn a few years ago?5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…I certainly think that Micro Focus shares should be worth more. However, I do think there are a couple of risks that may limit the eventual value of this business.Gaining pace?On 18 November, Micro Focus gave a trading update for the year to 31 October. The company said that revenue for the year would be around $3bn, but that profit margins would be “towards the upper end of management expectations”.The news sent the Micro Focus share price up by 30% on the day. The stock has since risen by another 40%, as investors buy in to CEO Stephen Murdoch’s vision of a more efficient and focused business.It’s still early days, as the company is less than one year into Mr Murdoch’s three-year turnaround plan. But with the shares trading on just four times forecast earnings for 2021, I think there’s still room for further gains.What I’d watchAs I mentioned, I have a couple of concerns about Micro Focus shares.The first issue is that this business isn’t showing many signs of growth. Although this is a software business, its main activity is helping companies maintain and develop older IT systems. Often, this includes digital transformation. Mostly, this means making old tech work with modern online services.The last time the company reported any sales growth was 2018. Since then, revenue (reported in dollars) has fallen from $4.754bn to about $3bn in 2020. The latest broker forecasts for 2021 suggest that revenue will slip lower again next year, to $2.834bn.Businesses that are in decline generally attract low valuations, even if they remain profitable. Mr Murdoch hopes to return Micro Focus to growth. I think there’s a good chance he’ll succeed, but it’s not a certainty.Micro Focus share price: don’t forget debtIf the shares continue to trade at current levels, I wouldn’t be surprised to see Micro Focus become a bid target. But anyone buying the company would need to buy its debt as well as its shares.The group had net debt in GBP of £3.2bn at the end of October. Adding this to the Micro Focus market cap of £1.7bn gives a total value for the business of about £5bn. This is known as the enterprise value — it’s the total commitment someone buying the whole company would have to make.How much is Micro Focus worth? I can’t say for sure, but I believe that even with the current debt load, this business is worth more than the current share price suggests.So, I’d hold the stock at 500p and monitor the performance of the business as we head into 2021. I think there could be more to come from this turnaround. Roland Head | Monday, 7th December, 2020 | More on: MCRO last_img read more

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