While macroeconomic uncertainty could hinder near-term growth, the tech industry’s long-term prospects remain bright amid government spending and advancements.
Given the industry’s solid growth prospects, investors could consider buying fundamentally sound tech stocks such as Logitech International S.A. (LOGI), Iteris, Inc. (ITI), and Daktronics, Inc. (DAKT) for solid returns. These stocks could be solid buys as per our POWR Ratings system.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the tech industry.
According to the most recent Gartner, Inc. prediction, worldwide IT spending would hit $4.7 trillion in 2023, a 4.3% increase from 2022. Increased investments in cloud computing, artificial intelligence, and digital transformation programs across businesses are primarily driving this expansion.
Rising demand for new technology and innovative solutions is projected to increase IT investment in the coming years.
The digital transformation market is anticipated to be worth $2.37 billion by 2030, growing at an 18.6% CAGR. The growing digitization trend, as well as the increasing requirement for effective resource utilization, are likely to fuel market expansion.
Moreover, the global IT hardware market is expected to grow at a 7.9% CAGR to $177.11 billion by 2028. Investors’ interest in tech stocks is evident from the Technology Select Sector SPDR ETF’s (XLK) 30% returns over the past nine months.
In light of these encouraging trends, let’s look at the fundamentals of the three top-rated Technology - Hardware stocks, beginning with number 3.
Stock #3: Logitech International S.A. (LOGI)
Headquartered in Lausanne, Switzerland, LOGI designs, manufactures, and markets products that connect people to working, creating, gaming, and streaming worldwide. The company offers pointing devices, such as wireless mouse; corded and cordless keyboards, living room keyboards, and keyboard-and-mouse combinations; PC webcams; and keyboards for tablets and smartphones, as well as other accessories for mobile devices.
LOGI’s forward EV/Sales of 2.30x is 10.3% lower than the industry average of 2.57x. Its forward non-GAAP PEG of 1.47x is 16.1% lower than the industry average of 1.75x.
LOGI’s trailing-12-month ROTC of 12.37% is 480.9% higher than the industry average of 2.13%. Its trailing-12-month ROCE of 14.23% is significantly higher than the industry average of 1.01%.
LOGI’s total liabilities came in at $1.21 billion for the period that ended June 30, 2023, compared to $1.30 billion for the period that ended March 31, 2023. Its total current liabilities came in at $957.14 million, compared to $1.05 billion for the same period.
The consensus revenue estimate of $4.32 billion for the year ending March 2025 represents a 6.5% increase year-over-year. Its EPS is expected to grow 29.9% year-over-year to $3.75 for the same period. It surpassed EPS estimates in three of four trailing quarters. LOGI’s shares have gained 49.1% over the past year to close the last trading session at $66.42.
LOGI’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
LOGI also has an A grade for Quality. It is ranked #14 out of 42 stocks in the Technology - Hardware industry. Click here for the additional POWR Ratings for Sentiment, Stability, Momentum, Value, and Growth for LOGI.
Stock #2: Iteris, Inc. (ITI)
ITI provides intelligent transportation systems technology solutions worldwide. The company offers smart mobility infrastructure solutions, including traveler information systems, transportation performance measurement software, traffic analytics software, transportation operations software, transportation-related data sets, and advanced sensing devices, among other services.
ITI’s forward Price/Sales multiple of 1.03 is 59.8% lower than the industry average of 2.55. Its forward EV/EBIT multiple of 8.68% is 44.5% lower than the industry average of 15.62.
ITI’s trailing-12-month asset turnover ratio of 1.38x is 123.8% higher than the 0.62x industry average.
ITI’s total revenues for the fiscal first quarter (ended June 30, 2023) increased 29.3% year-over-year to $43.55 million, while its gross profit increased 65.4% year-over-year to $16.80 million. ITI’s adjusted EBITDA of $3.68 million for the same quarter compared to adjusted EBITDA of negative $2.45 million in the prior-year quarter.
Street expects ITI’s revenue to increase 10.9% year-over-year to $173.02 million for the year ending March 2024. Its EPS is expected to come in at $0.27 for the same period. Over past year the stock has gained 43% to close the last trading session at $4.16.
ITI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked #5 in the same industry. It has a B grade for Growth, Value and Sentiment. To see additional ITI’s ratings for Stability, Momentum, and Quality, click here.
Stock #1: Daktronics, Inc. (DAKT)
DAKT designs, manufactures, markets, and sells electronic display systems and related products for sporting, commercial, and transportation appliances globally. The company operates through Commercial; Live Events; High School Park and Recreation; Transportation; and international segments.
On August 4, 2023, DAKT announced that it would expand its relationship with the Kraft Group, the New England Patriots, and the New England Revolution by adding 14 new LED displays to the venue in 2023, including the country's largest outdoor videoboard in a sports facility. This spring and summer, the installation took place at Gillette Stadium in Foxborough, Massachusetts.
DAKT’s trailing-12-month EV/Sales multiple of 0.49 is 80.7% lower than the industry average of 2.55. Its trailing-12-month EV/EBIT multiple of 5.61% is 70.3% lower than the industry average of 18.90.
DAKT’s trailing-12-month net income margin of 3.84% is 89% higher than the industry average of 2.03%. Its trailing-12-month EBIT margin of 8.80% is 95% higher than the 4.51% industry average.
During the fiscal first quarter that ended July 29, 2023, DAKT’s net sales rose 35.3% year-over-year to $232.53 million. Its gross profit increased 175.8% year-over-year to $71.15 million. Also, the company reported a net income of $19.20 million and $0.42 per share, compared to a net loss of $5.33 million and $0.12 in the year-ago quarter.
The stock has gained 227.7% over the past year to close the last trading session at $8.75.
It’s no surprise that DAKT has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Value and Sentiment and a B grade for Growth and Quality. It is ranked first in the same industry.
Beyond what is stated above, we’ve also rated DAKT for Momentum, and Stability. Get all DAKT ratings here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
LOGI shares were trading at $67.75 per share on Wednesday morning, up $1.33 (+2.00%). Year-to-date, LOGI has gained 8.84%, versus a 12.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
The post 3 Tech Stocks Showing Strong ‘Buy' Signals for October appeared first on StockNews.com