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The FTSE 100 isn’t renowned for technology stocks. But the fact is, there are some really great tech-focused businesses in the index.
Here, I’m going to highlight what I consider to be one of the Footsie’s best tech plays today. This stock is currently about 11% off its highs and I see value on offer right now.
Developing AI solutions with Microsoft
The business in focus today is London Stock Exchange Group (LSE: LSEG), or ‘LSEG’ for short. Originally a stock exchange operator, it’s now one of the world’s leading financial data companies.
These days, LSEG provides vital financial data to banks, asset managers, hedge funds, fintech platforms, financial media businesses, and many other other types of businesses. These companies – which pay recurring fees – use its data for trading and investing, analysis, portfolio management, risk management, and other related activities.
Note that currently, LSEG is working closely with tech giant Microsoft – which recently took a 4% stake in the British company – to develop artificial intelligence (AI) solutions for customers. This should significantly enhance its offering, and it may enable the company to capture market share from rivals such as Bloomberg and FactSet.
The first batch of these AI solutions is now available for customers. So, this company is, without a doubt, participating in the global tech revolution.
Growth at a reasonable price
The thing is, I’m not convinced that everyone has cottoned on to the fact that LSEG is a fully-fledged tech/AI company today. I say this because the valuation seems quite reasonable at present (tech stocks often have lofty valuations).
Looking ahead to 2026, City analysts expect the company to generate earnings per share of 441p for the year (up 12% on the forecast for this year). That puts the stock on a forward-looking price-to-earnings (P/E) ratio of just 24.5 at today’s share price of 10,790p.
That strikes me as good value. At that multiple, I believe the stock is worth considering.
To my mind, there’s potential for an upward valuation re-rating here. Add in earnings growth of 6%-10% per year and capital returns to shareholders (the company pays a small dividend and is also doing share buybacks), and long-term returns could be attractive.
It’s worth noting that in the past, this stock has been a very good investment. Over the last 10 years, the share price has more than quadrupled.
I’m bullish
Of course, past performance isn’t an indicator of future returns. And there are risks that could hurt the share price.
Competition from rivals is one. If a competitor was to develop a far superior product, LSEG’s growth could slow.
All things considered though, I’m bullish on this FTSE tech stock. I’ve made it a larger holding in my own portfolio and I plan to hold onto it for the long term.
