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Stock of the Week: Iomart

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Ian Forrest, investment research analyst at The Share Centre, picks cloud computing consultancy firm Iomart as stock of the week.

AIM-listed group Iomart has been involved in cloud computing long before cloud computing became fashionable. It is one of the UK’s leading companies in an industry that is expected to grow fairly rapidly as businesses and consumers generate more data and become comfortable with having that data located offsite.

Essentially, Iomart facilitates data hosting services so that clients and the end user can have access to data and web services in a secure manner while reducing costs and complexity and investors should recognise that the group expects the creation of data to be exponential for some years to come.

Last week, the group reported its half year results in which it stated that revenues were up 12% on the same period last year, coming in at £47m, while adjusted pre-tax profits rose by 9% to £11.6m. Despite the numbers falling slightly short of expectations, the shares rose on the back of the announcement and, in general, the shares have made steady progress over recent years helping cement our belief that the long-term prospects have not fundamentally changed.

This is a business which is operationally geared, and it can take more business for relatively little cost. The group has partnerships and programmes with some of the largest computing businesses in the world such as Microsoft and Dell and there’s further promise in regards to hosting government departments and the continuation of targeting small acquisitions. As a result of all of this, as well as rising dividend payouts, we continue to recommend Iomart as a ‘buy’ for investors looking for capital growth and willing to accept a higher level of risk.

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