The technology industry is well-positioned for significant growth and expansion in the foreseeable years, driven by sustained IT spending and the rapid adoption of emerging technologies worldwide. Given the industry tailwinds, it could be wise to invest in fundamentally sound tech stocks Ricoh Company (RICOY), Spirent Communications (SPMYY), and AstroNova (ALOT) high on Value and Stability. Read on….
With the growing enterprise demand for tech products and solutions to keep up with the digital transformation, the tech sector’s long-term prospects look promising. Digitalization assists businesses in saving costs, streamlining processes, and improving efficiency and productivity.
Given the industry’s bright future, investors could consider buying fundamentally strong tech stocks Ricoh Company, Ltd. (RICOY), Spirent Communications plc (SPMYY), and AstroNova, Inc. (ALOT) bursting with Value and Stability.
Despite lingering macroeconomic uncertainty, the technology industry continues to remain resilient and witness robust growth, driven by strong demand for tech products and services. The COVID-19 pandemic has sped up digital transformation by several years. Adoption of advanced technologies has taken a quantum leap at the organizational and industry levels.
The tech industry is extending its reach into several industries, including healthcare, real estate, manufacturing, and retail, using digital advancements to improve efficiency and spur innovation. Furthermore, enterprises across the globe are increasingly investing in emerging technologies such as AI, cloud computing, robotics, IoT, the metaverse, and machine learning.
As per Gartner Digital Markets’ 2023 SMB Tech Trends Survey, emerging technology plays an integral part in the IT strategy of 57% of buyers, and most organizations are early adopters of new technology. Meanwhile, worldwide IT spending is expected to total $4.70 trillion this year, up 4.3% year-over-year, according to the latest forecast by Gartner.
Furthermore, the global IT hardware market is poised to grow at a 6.1% CAGR by 2027. Growing investment in Data Center infrastructure worldwide should drive the demand for IT hardware, including computing equipment like desktops & servers, and networking equipment such as routers, modems, switches, and storage devices.
Moreover, solid demand for cloud-based services among enterprises has considerably driven demand for data centers in recent years. Hybrid work culture and the emergence of advanced technologies are also expected to propel the hardware market’s growth.
For instance, AI technology is becoming more widespread in several industries and applications and fundamental hardware requirements for AI include high-performance computing (HPC) systems, graphic processing units (GPUs), central processing units (CPUs), data storage systems, and networking infrastructure.
Investors’ interest in tech hardware stocks is evident from the S&P Technology Hardware Select Industry Index’s 24.3% returns over the past six months.
Given the solid growth potential of the industry, quality tech stocks RICOY, SPMYY, and ALOT could be ideal additions to your portfolio.
Let’s discuss these stocks in more detail.
Ricoh Company, Ltd. (RICOY)
Headquartered in Tokyo, Japan, RICOY offers office and commercial printing solutions and related solutions. The company operates through Digital services; Digital Products; Graphic Communications; and Industrial Solutions segments. It sells multifunctional printers (MDPs), laser printers, scanners, personal computers, network equipment, and solutions related to documents.
On June 19, RICOY launched the RICOH SC-20, a work inspection camera utilizing image recognition technology to allow real-time confirmation of proper manual work process performance.
The RICOH SC-20, the successor model to the RICOH SC-10A, is a smart camera that can prevent work errors by automatically checking the status of manufacturing operations to assemble parts and other components via image recognition technology. The new product launch is expected to drive the company’s growth and profitability.
On May 19, RICOY and Toshiba Tec Corporation announced a partnership for integrating businesses regarding the development and manufacturing of multifunction printers and other devices by necessary procedures such as Simplified Absorption-type Company Split effective on a specific day between April 1, 2024, and June 30, 2024. This deal should bode well for both the companies.
In terms of forward EV/Sales, RICOY is currently trading at 0.40x, 86.67% lower than the industry average of 2.97x. Also, the stock’s forward EV/EBITDA and Price/Sales multiples of 4.95 and 0.34 compare to the respective industry averages of 14.69 and 2.88.
RICOY pays $0.24 annually as dividends which translates to a yield of 2.76% at the current price. Its four-year average dividend yield is 2.54%. The company’s payouts have grown at a CAGR of 3.7% over the past five years. RICOY has paid dividends for nine consecutive years.
For the fiscal year that ended March 31, 2023, RICOY’s sales increased 21.4% year-over-year to ¥2.13 trillion ($15.08 billion) and its gross profit grew 19.7% from the prior-year quarter to ¥745.40 billion ($5.28 billion). The company’s operating profit came in at ¥78.70 billion ($557.16 million), an increase of 96.6% year-over-year.
Furthermore, RICOY’s profit attributable to owners of the parent increased 79% year-over-year to ¥54.30 billion ($364.42 million), while its EPS was ¥88.13, up 94.3% year-over-year.
Analysts expect RICOY’s revenue to grow 11.5% to $3.91 billion for the second quarter ending September 2023. The company’s revenue for the fiscal year (ending March 2024) is expected to increase 328.2% year-over-year to $15.99 billion. Moreover, RICOY topped the consensus revenue estimates in each of the trailing four quarters, which is impressive.
Shares of RICOY have gained 15.9% over the past six months to close the last trading session at $8.80. The stock’s 24-month beta is 0.24.
RICOY’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
RICOY has a B grade for Value, Growth, Stability, and Quality. It is ranked #6 in the Technology – Hardware industry.
Beyond what is stated above, we’ve also rated for Sentiment and Momentum. Get all RICOY ratings here.
Spirent Communications plc (SPMYY)
SPMYY provides automated test and assurance solutions in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. The company operates in two segments: Lifecycle Service Assurance and Networks & Security. It is headquartered in Crawley, the United Kingdom.
On June 29, SPMYY got selected by Indonesia’s new Telecommunication Equipment Testing Center (BBPPT) to conduct high-speed Ethernet network equipment and electromagnetic compatibility (EMC) testing. Utilizing Spirent TestCenter allows labs to facilitate advanced testing features that include high scalability, automation, and real-time reporting for complex network systems.
On June 27, SPMYY announced the availability of an industry-first 400G probe for next-generation network testing and monitoring. The company offers the only network assurance solution that provides such highly dense capacity for emulation, activation testing, and performance monitoring of 400G network traffic. This should benefit the company significantly.
In terms of forward EV/Sales, SPMYY is trading at 1.76x, 40.05% lower than the industry average of 2.97x. Likewise, the stock’s forward EV/EBITDA multiple of 8.44 is 42.6% lower than the industry average of 14.69. And its forward Price/Sales of 2.12x compares to the 2.88x industry average.
The company pays an annual dividend of $0.31, which translates to a 3.49% yield on the prevailing share price. Its four-year dividend yield is 2.50%. Its dividend payments have grown at CAGRs of 12.7% over the past three years and 13.8% over the past five years.
On May 4, SPMYY issued the Trading Update for the period from January 1 to 31 March 2023. The company’s first-quarter performance was in line with the management plan communicated in March. During the quarter, SPMYY saw increasing engagement from its customers across 5G lab and live network test and assurance.
The company also witnessed started the year with continued positive order intake momentum for its Positioning products from its US government business and other commercial customers. It maintained a strong cash position, was $220 million at the first quarter, an increase from $210 million at the end of December 2022.
During the fiscal year that ended December 31, 2022, SPMYY’s revenues increased 5.5% year-over-year to $607.50 million. Its adjusted operating profit rose 9.3% from the year-ago value to $129.5 million. Its adjusted profit for the year attributable to owners of the parent company and adjusted EPS grew 13.5% and 14% year-over-year to $114.5 million and 18.75 cents, respectively.
SPMYY’s revenue is expected to increase marginally year-over-year to $599.43 million for the fiscal year 2023. Also, the consensus revenue estimate of $619.96 million for the fiscal year 2024 reflects a 3.4% year-over-year improvement.
The stock has declined marginally over the past month to close the last trading session at $8.78. SPMYY’s 24-month beta is 0.56.
SPMYY’s POWR Ratings reflect its solid outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Stability and Quality and a B for Value. It is ranked #2 in the same industry.
Click here to see additional SPMYY’s ratings for Sentiment, Momentum, and Growth.
AstroNova, Inc. (ALOT)
ALOT designs, develops, manufactures, and distributes specialty printers, and data acquisition and analysis systems, including hardware and software, which incorporate advanced technologies to acquire, store, analyze, and present data in multiple formats. The company operates in two segments: Product Identification (PI) and Test & Measurement (T&M).
In terms of trailing-12-month EV/Sales, SPMYY is trading at 0.88x, 70.9% lower than the industry average of 3.04x. And the stock’s trailing-12-month Price/Sales multiple of 0.70 is 75.5% lower than the industry average of 2.87. Moreover, its trailing-12-month Price/Book of 1.22x compares to the 3.19x industry average.
During the fiscal 2024 first quarter ended April 29, 2023, ALOT’s revenue increased 14.2% year-over-year to $35.42 million and its gross profit grew 15.4% from the year-ago value to $12.39 million. In addition, its operating income was $1.46 million, up 91.2% year-over-year. Also, the company’s adjusted EBITDA rose 59.9% from the prior-year quarter to $3.05 million.
In addition, the company’s net income came in at $848 thousand and $0.11 per share, increases of 99.5% and 83.3% year-over-year, respectively.
Over the past three years, ALOT’s revenue and EBITDA have grown at CAGRs of 4.7% and 16.5%, respectively. Also, the company’s net income and EPS have increased at 84.5% and 81.2% CAGRs over the same period, while its total assets have grown at a 5.1% CAGR.
ALOT’s shares have gained 16.4% year-to-date and 22.9% over the past year to close the last trading session at $14.50. The stock has a 24-month beta of 0.38.
ALOT’s POWR Ratings reflect this positive outlook. It has an overall rating of B, which translates to Buy in our proprietary rating system.
ALOT has a B grade for Growth, Value, Stability, and Sentiment. It is ranked #7 of 43 stocks in the Technology – Hardware industry. To see the other ratings of ALOT for Momentum and Quality, click here.
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RICOY shares were unchanged in premarket trading Wednesday. Year-to-date, RICOY has gained 16.09%, versus a 19.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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