Why aren’t more investors talking about investing in this British cybersecurity company?

This British cybersecurity company doesn’t get the attention it deserves, and I think it’s shares in NCC are looking good.

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A price-to-earnings ratio of around 30 may not appear to suggest bargain investment, but I think NCC Group (LSE:NCC) is a perfect example of the kind of company that should thrive in the post-Covid-19 world.

NCC is a cybersecurity business with a worldwide reach. It works with private and public sectors, has a presence in the UK, the rest of Europe, North America and, perhaps most important of all, a growing business in the Asia Pacific region.

The company is research-driven and has outstanding expertise in the cyber arena.

NCC shares 

NCC shares have taken a hammering since the Covid-19 crisis began. The share price fell from around 230p at the beginning of the year to 147p.

A superficial analysis would suggest that the fall in the share price is strange. After all, cybersecurity is supposed to be an area due to see rapid growth. A slightly more detailed look at the company reveals the reasons — many of its customers are struggling, and this will hit sales. Look deeper still, and the initial analysis looks about right.

Cybersecurity set to explode 

To describe cyber as an area likely to see rapid growth is like describing the sun as a region of our solar system where it is quite hot.

Cyber isn’t merely set to grow fast, business activity in this area will explode.

It was The Economist that said “data is the new oil,” and it was right. PwC projects that AI will contribute $15.7tn a year to the global economy by 2030. Data is to AI, what oil is to the internal combustion engine. It makes AI possible. However, the more data we use, the greater is the risk presented by cybersecurity.

Covid-19 and cyber 

I wonder whether the markets have understood the implications of the Covid-19 crisis and associated lockdowns in all of this. We have seen an acceleration in the move to digital. 

Post-Covid-19, I expect remote working to stay. The so-called Zoom economy is not going away, and this, in turn, creates a massive cybersecurity challenge. With employees working away from their offices, maybe accessing the internet via a router applying default passwords, the risks of data breaches grows enormously.

I expect the data economy to grow exponentially, and the risks of data breaches and need for robust cybersecurity to grow at a similar pace. Shares in companies that can offer expertise in this area may not necessarily increase exponentially, but I do expect them to increase pretty fast.

NCC has expertise in abundance. It is, by the way, working with the NHS and supporting its use of data from contact tracing apps. 

I think the fact that the NCC share price has fallen so far this year illustrates how the markets have not cottoned on to how the world is changing.

The lower share price means its P/E ratio has fallen from the giddy heights seen earlier in the year, while the dividend yield looks a lot more attractive — even if it takes a one-off knock this year, which I think is a distinct possibility.

NCC Group is due to provide a trading update following the end of its financial year to 30 May 2020 on 23 June. I, for one, am looking forward to it. As for the shares, I think they look tempting.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Michael Baxter has no position in any of the shares mentioned. The Motley Fool UK owns shares of NCC. 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.

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