Despite macroeconomic concerns, demand for technology products and services is expected to remain robust. Also, given the solid long-term prospects of the industry, fundamentally sound tech stocks Concentrix (CNXC), Indra Sistemas (ISMAY), and ON24 (ONTF) may be worth buying right now. Read on.
While macroeconomic uncertainties may impede near-term growth, the long-term prospects of the tech industry remain bright amid government spending and digital transformation across industries.
So, quality tech stocks Concentrix Corporation (CNXC), Indra Sistemas, S.A. (ISMAY), and ON24, Inc. (ONTF) could be worth buying.
According to Gartner, Inc., global government IT services spending is expected to reach $209.10 billion in 2023, an 8.9% rise from 2022.
The North America IT Services market is anticipated to grow at a 5.8% CAGR to $861.69 billion by 2032. The IT revolution has altered businesses by increasing operational efficiency and allowing businesses to focus on their strengths.
Furthermore, the widespread adoption of online transactions, the emergence of advanced technologies such as AI and blockchain in the banking, finance, and insurance industries, as well as the growing number of e-wallets, are expected to drive the growth of the North America IT services market.
In addition, the market for digital transformation is predicted to grow at a 21% CAGR to $2.74 trillion by 2030, fuelled by changing customer expectations, competitive pressures, developing business models, operational efficiency, and sustainability.
Investors’ interest in tech stocks is evident from the Technology Select Sector SPDR ETF (XLK) 19% returns over the past three months.
Let us look deeper into the fundamentals of the featured stocks.
Concentrix Corporation (CNXC)
CNXC is a leading provider of Customer Experience (CX) solutions and technology. It optimizes CX processes and provides innovative tech, automation, analytics, and business transformation. In addition, the company’s integrated solutions support customer lifecycle, including CX/UX strategy, design, and actionable insights.
CNXC’s forward EV/Sales multiple of 1.01 is 40.2% lower than the industry average of 1.68. Its forward non-GAAP P/E multiple of 6.95 is 59.3% lower than the industry average of 17.09.
CNXC’s trailing-12-month levered FCF margin of 8.47% is 62.6% higher than the industry average of 5.21%. Its trailing-12-month gross profit margin of 35.80% is 20% higher than the industry average of 29.83%.
During the fiscal first quarter that ended February 28, CNXC’s revenue increased 6.5% year-over-year to $1.64 billion. Its non-GAAP operating income increased 7.8% year-over-year to $217.60 million. The company’s adjusted EBITDA increased 7.5% from the year-ago value to $255.80 million.
The consensus revenue estimate of $6.77 billion for the year ending November 2023 represents a 7.1% increase year-over-year. Its EPS is expected to grow at marginally year-over-year to $11.79 for the same period. CNXC’s shares have lost marginally intraday to close the last trading session at $81.50.
CNXC’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.
CNXC has a B for Value. Within the Technology – Services industry, it is ranked #18 out of 81 stocks. Click here for the additional POWR Ratings for Stability, Growth, Momentum, Sentiment, and Quality for CNXC.
Indra Sistemas, S.A. (ISMAY)
Based in Alcobendas, Spain, ISMAY operates as a technology and consulting company worldwide. It designs, develops, produces, integrates, operates, maintains, repairs, and markets systems, solutions, and services based on the use of information technologies; computing, electronics, and communications.
ISMAY’s forward EV/Sales multiple of 0.51 is 82.6% lower than the industry average of 2.95. Its forward Price/Book multiple of 0.50 is 82.1% lower than the industry average of 4.81.
ISMAY’s trailing-12-month ROCE of 18.40% is significantly higher than the industry average of 0.50%. Its trailing-12-month ROTA of 3.85% is significantly higher than the industry average of 0.02%.
During the fiscal first quarter ended March 31, 2023, ISMAY’s revenues increased 7.8% year-over-year to €917 million ($994.83 million). Also, its net profit increased 12.8% year-over-year to €44 million ($47.73 million), while its EPS increased 13.6% year-over-year to €0.25.
Analysts expect ISMAY’s revenue to increase 6.6% year-over-year to $4.34 billion for the year ending December 2023. The stock has gained 52.6% over the past nine months to close the last trading session at $5.95.
ISMAY’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It is ranked #19 in the same industry. It has a B grade for Value and Stability. To see additional ISMAY’s ratings for Sentiment, Momentum, Growth, and Quality, click here.
ON24, Inc. (ONTF)
ONTF provides a cloud-based digital engagement platform that enables businesses to convert customer engagement into revenue through interactive webinar, virtual event, and multimedia content experiences worldwide.
ONTF’s forward EV/Sales multiple of 0.39 is 86.9% lower than the industry average of 2.95. Its forward Price/Sales multiple of 2.29 is 18.4% lower than the industry average of 2.81.
ONTF’s trailing-12-month levered FCF margin of 10.48% is 49.4% higher than the industry average of 7.01%. Its trailing-12-month gross profit margin of 72.06% is 46.4% higher than the industry average of 49.24%.
ONTF’s total operating expenses decreased marginally year-over-year to $49.79 million in the first quarter that ended March 31, 2023. Its current liabilities came in at $105.56 million for the period that ended March 31, 2023, compared to $110.73 million for the period that ended December 31, 2022.
Also, its total liabilities came in at $111.47 million, compared to $117.51 million in the same period.
Street expects ONTF’s EPS come in at $0.07 for the year ending December 2024. Over the past three months, the stock has gained 20.6% to close the last trading session at $8.16.
ONTF has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Value. It is ranked #20 in the same industry.
Beyond what is stated above, we’ve also rated ONTF for Growth, Stability, Sentiment, Quality, and Momentum. Get all ONTF ratings here.
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CNXC shares were unchanged in premarket trading Friday. Year-to-date, CNXC has declined -38.50%, versus a 15.00% 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.
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