The FTSE 100 index isn’t known for its technology stocks. But things are starting to change. Today, there are two tech companies in the index’s top 10 constituents. Here’s I’m lookng at one of them.
A Footsie winner
The company in focus today is London Stock Exchange Group (LSE: LSEG), or ‘LSEG’ for short. With a market cap of approximately £65bn, it’s currently the 9th-largest business in the Footsie.
Given its past history (as a stock exchange operator), this company is often still viewed as a financial firm. However today, it’s far more of a technology business.
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You see, after the acquisition of Refinitiv in 2021, LSEG is now one of the world’s leading providers of financial data. Currently, it serves 99 of the top 100 banks and 75 of the top 100 global asset managers.
And its products and services are only becoming more technological. Recently, the company has been working with tech powerhouse Microsoft to incorporate artificial intelligence (AI) solutions into its offering (these will be rolled out this year).
These powerful new features should further entrench the company’s leading position in the financial data space. And they could end up being a significant growth driver for the group.
Worth a look today?
Is this tech stock worth considering for a portfolio today?
I think so. I hold its shares myself and it’s a large holding for me (meaning I’m confident in the long-term story).
In the years ahead, I expect LSEG to generate solid top- and bottom-line growth as it wins new customers, launches new products, and raises its ongoing prices. I also think there’s potential for higher valuations as investors realise that the company is now a major player in the financial data industry.
That said, I wouldn’t go ‘all-in’ on the stock today and buy a full-sized position to start with. If an investor was looking to get into this stock, I’d suggest that they consider starting with a small position and building it out over time.
Recently, the stock had a great run (it’s up more than 30% in the last year). So, we could see a pullback (some profit taking) in the short term.
In terms of the valuation, the forward-looking price-to-earnings (P/E) ratio is now about 29 using the consensus 2025 earnings per share forecast of £4.03. That’s not crazy for a software company but I’d prefer to invest at a slightly lower valuation as an earnings multiple of 29 doesn’t leave much room for a setback (like a loss of market share to a competitor such as Bloomberg).
The good news is that investors may not have to wait long for a better buying opportunity. Later this month, on Thursday 27 February, the company will be posting its full-year earnings.
Often with tech stocks, earnings (and forward-looking guidance) create some short-term volatility. So, we could see a nice entry point.
