Global tech shares have been hit hard after US inflation data fuelled expectations of further rate hikes, and that kind of sell-off often leaves solid British technology businesses trading at prices that look too low. When sentiment sours, good assets can be marked down along with the hype. This article highlights three UK tech stocks that currently look mispriced and explains why some investors are paying attention.
The three stocks covered below are just a sample of what looks mispriced in UK tech. The full screen has surfaced 21 more companies with similarly interesting stories that do not fit into this article.
If you want to go straight to the source and identify, compare, and analyze undervalued opportunities across software, hardware, and semiconductors, head into the Undervalued Tech screener.
Bytes Technology Group (LSE:BYIT)
Overview: Bytes Technology Group provides software, cloud and security licensing and services alongside hardware and consulting, generating substantial recurring tech revenue.
Operations: Bytes Technology Group reports £240.8 million from IT Solutions Provider activities, primarily serving UK customers with smaller contributions from Europe and elsewhere.
Market Cap: £985 million
Bytes Technology Group matters for this Undervalued Tech screen because its cloud, AI and security licensing engine connects recurring software demand directly to a share price that some investors see as out of line with that foundation.
"Although services gross profit rose 38% with around two thirds of that now coming from recurring managed work, the much slower 2.5% gross profit growth compared with 11.5% gross invoiced income and a 5.6% fall in operating profit suggest that higher margin services may not be scaling fast enough to counter weaker reseller economics."
What really shapes the upside case for Bytes Technology Group is how one unseen pressure on its profitability resolves in the period ahead.
That pressure point is exactly what the full narrative for Bytes Technology Group unpacks, showing how profitability could decouple from reseller margins if the services engine accelerates.
Alfa Financial Software Holdings (LSE:ALFA)
Overview: Alfa Financial Software Holdings builds and runs Alfa Systems, cloud asset finance software that gives auto and equipment lenders recurring SaaS revenue tools.
Operations: Alfa Financial Software generates about £129 million from the sale of software and related services, with reported exposure to the Americas and other regions.
Market Cap: £482 million
Alfa Financial Software matters for this Undervalued Tech screen because Alfa Systems turns niche lending workflows into subscription software. This gives the business a steady, contract based tech revenue stream that many investors prefer over one off license sales.
"The transition to a SaaS model with a focus on Subscription revenue is driving mid-teens growth, increasing long-term recurring revenues and improving revenue predictability. This is likely to have a positive impact on future revenue growth and operating margins."
The real test for Alfa Financial Software now is how a single shift in customer buying habits ultimately feeds through to margins and cash flow.
That shift is exactly what the full narrative for Alfa Financial Software Holdings unpacks, highlighting where Alfa Financial Software could see margins accelerate or stall as subscription demand reshapes the economics.
GB Group (LSE:GBG)
Overview: GB Group runs an identity and location data software platform that helps digital businesses verify users, combat fraud and meet compliance obligations.
Operations: GB Group generates about £175 million from Identity solutions, £89 million from Location services and £22 million from Global Fraud Solutions across the UK, US, Australia and other markets.
Market Cap: £347 million
GB Group matters for this Undervalued Tech screen because its identity software engine ties directly into how digital businesses manage risk, trust and user onboarding.
"The accelerating global adoption of digital identity, compliance regulations (such as KYC/AML), and digital financial services is set to structurally elevate addressable markets for GB Group. This may position the company as a pivotal provider to financial institutions, e-commerce, and governments, creating multiyear tailwinds that could drive annualized double-digit revenue growth."
What ultimately tips the balance here is how one profitability reset interacts with that growing demand for high quality identity and fraud prevention tools.
That profitability reset is exactly what the full narrative for GB Group sets out, showing where GB Group’s economics could quietly accelerate as identity demand and fraud controls keep tightening worldwide.
Seeking Fresh Alternatives Before They Fly
Markets move fast. Fresh ideas can go from quiet to breakout before most investors even look. Scan what others miss while it still matters and get in early.
- Spot cash generative underdogs before momentum stories form by scanning the 5 high quality undiscovered gems that screen for quality first and hype last.
- Zero in on durable income streams as yields shift by reviewing the 3 dividend fortresses that focuses on balance sheet strength alongside payout power.
- Track where real profits meet real AI demand by combing through the 39 profitable AI stocks that aren't just burning cash curated for earnings, not just ambitious slide decks.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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