Can the Micro Focus share price keep climbing?

first_img See all posts by Zaven Boyrazian Zaven Boyrazian | Monday, 29th March, 2021 | More on: MCRO Image source: Getty Images Are you on the lookout for UK growth stocks?If so, get this FREE no-strings report now.While it’s available: you’ll discover what we think is a top growth stock for the decade ahead.And the performance of this company really is stunning.In 2019, it returned £150million to shareholders through buybacks and dividends.We believe its financial position is about as solid as anything we’ve seen.Since 2016, annual revenues increased 31%In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259Operating cash flow is up 47%. (Even its operating margins are rising every year!)Quite simply, we believe it’s a fantastic Foolish growth pick.What’s more, it deserves your attention today.So please don’t wait another moment. The Micro Focus (LSE:MCRO) share price has been on a downward trajectory since 2017, decreasing by more than 75%. But recently, it started to climb again. Over the last year, the Micro Focus share price has risen by 43%. And over the last six months, the growth is closer to 115%.What caused this recent surge? Why did the stock price fall in the first place? And should I be adding this business to my growth portfolio? 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… Especially since I’ve found another growth stock that looks far more promising… Get the full details on this £5 stock now – while your report is free. Our 6 ‘Best Buys Now’ Shares Can the Micro Focus share price keep climbing?center_img Enter Your Email Address FREE REPORT: Why this £5 stock could be set to surge Simply click below to discover how you can take advantage of this. 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. Micro Focus’s land-sliding share priceMicro Focus is a software and technology company. It serves over 40,000 customers worldwide and provides software solutions designed to assist in operating digital infrastructure. This includes application delivery, cyber-security, and AI-driven analytics. It currently has a portfolio of over 300 products that suit the needs of various industries, including pharmaceuticals, aerospace, and telecommunications.This vast collection of products has expanded over time, thanks to a series of strategic acquisitions. And at one point, Micro Focus was the UK’s largest technology company. So what went wrong?Acquisitive growth strategies are risky and Micro Focus learned the hard way. In 2017 it completed the acquisition of Hewlett Packard Enterprise’s software business for $8.8bn. Unfortunately, the deal, which was supposed to propel Micro Focus into a new growth era, turned into a disaster.The integration process was not as seamless as initially predicted and led to an additional $960m of exceptional expenses. What’s worse, since acquiring the business, total revenue has been declining at an alarming rate. Needless to say, this isn’t good news and appears to be the primary catalyst for Micro Focus’s collapsing share price. But is the company making a comeback?Reasons to be cheerfulTo fix the problems introduced with the Hewlett acquisition, the management team initiated a turnaround plan. Recently this has seemed to be having a positive effect. While total revenue is still falling, Micro Focus has slowed the fall faster than expected by analysts.The firm reported a massive $2.97bn loss for 2020. However, $2.8bn of that was a goodwill impairment charge, confirming that it overpaid for the Hewlett acquisition. This is a one-time expense, and if its effects are ignored, the company is at a similar level of underlying profitability as 2019.What’s more, its cash conversion ratio has increased from 0.95 to 1.13, indicating that internal investments are generating higher cash flows.This is good news. I feel. And it makes the recent boost to Micro Focus’s share price understandable.The bottom lineOverall, I think the worst might have passed, and it looks like the firm is finally getting back on track. Therefore, I believe the Micro Focus share price can continue climbing over the long term.But there is still a problem that has yet to be resolved — its debt. Today, the market capitalisation of Micro Focus is around £1.7bn. But its total debt sits closer to £4.9bn courtesy of the Hewlett acquisition. While the next loan maturity isn’t due until June 2024, that is still a massive bill that the company might struggle to pay in its current state.And so, for now, I’m going to wait and see how Micro Focus performs in 2021. Therefore, I’m not adding the stock to my portfolio today. 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. Zaven Boyrazian does not own shares in Micro Focus. 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.last_img read more