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Should I buy this FTSE 250 tech stock for growth and returns?

Female analyst sat at desk looking at pie charts on paper

One FTSE 250 stock that has caught my eye recently is NCC Group (LSE:NCC). Should I buy or avoid the shares? Let’s take a closer look.

Cyber security specialist

As an introduction, NCC is a cyber security firm that specialises in information assurance and ensuring that companies are compliant when it comes to their software licensing needs. This is currently a growing market as technology adoption is advancing.

So what’s the current state of play with NCC shares? As I write, they’re trading for 232p. At this time last year, the stock was trading for 270p. This is a 14% decline over a 12-month period.

It is worth noting that many FTSE stocks have declined as a result of recent macroeconomic conditions as well as the tragic events in Ukraine.

A FTSE 250 stock with risks

So let’s look at some potential pitfalls of buying NCC shares. First of all, the recent market pullback has seen tech stocks in general fall out of favour. It seems that investors prefer safer, more defensive options, whereas tech stocks are seen as riskier growth options.

Next, NCC helps other businesses from a cyber security point of view, but that does not mean it is not susceptible to an attack itself. After all, it possesses lots of information about many companies and their operations. I’m confident it has mechanisms in place to protect itself, but an attack could be devastating for its reputation, performance, and investor sentiment.

The bull case and my verdict

Now let’s take a look at the positives of owning NCC shares. To start with, NCC has had a favourable track record of performance in recent years. I am aware that past performance is not a guarantee of the future. However, looking back, I can see it has grown revenue and profit for the past four years consecutively. As mentioned earlier, the rising adoption of tech could support this trend in continuing.

With impressive performance growth, shareholder returns tend to follow. NCC shares would boost my passive income stream through dividend payments. The current dividend yield stands at just less than 2%. This is in line with the FTSE 250 average of 1.9%. I am conscious that dividends are never guaranteed. They can be cancelled at the discretion of the business at any time to conserve cash.

To summarise, I like the look of NCC Group shares. For me, the positives outweigh the negatives. The biggest attraction for me is the fact NCC is operating in a high-growth market with lots of potential ahead for it to leverage its already growing presence.

Although I cannot purchase every stock I like the look of, I would be willing to add NCC shares to my holdings. I believe they could boost my portfolio for a long time to come.

The post Should I buy this FTSE 250 tech stock for growth and returns? appeared first on The Motley Fool UK.

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Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has recommended 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.