The advent of hybrid work culture has rendered it imperative for enterprises to procure modernized and up-to-date computer hardware, thereby ensuring seamless operations. The rapid pace of digitalization and the ubiquitous adoption of advanced technologies are also propelling significant growth in the industry.
Given these circumstances, it appears wise to consider investing in fundamentally robust technology stocks AstroNova, Inc. (ALOT), Sharp Corporation (SHCAY), and TransAct Technologies Incorporated (TACT), as they are capturing significant investor attention. Let's understand this in detail.
Technology hardware is pivotal in unlocking peak software performance. The relentless appetite for such hardware is set to persist well into the future, propelled by ongoing investments from consumers, governments, and enterprises, ensuring a sustained upward growth trajectory.
The industry's ascent is primarily fueled by the increasing adoption of cutting-edge technologies. The rise of Artificial Intelligence (AI) and machine learning, in particular, have ignited a substantial demand for intricately specialized hardware components.
Furthermore, IoT technology continues to bolster enterprise digital transformation, sparking substantial demand for interconnected hardware, including sensors, processors, and wireless solutions. As per a Mordor Intelligence report, the IoT devices market is projected to grow at a CAGR of 23.3% and reach $336.64 billion by 2028.
Additionally, as per The Business Research Company's report, the global computer hardware market is on track to reach $909.80 billion by 2027, with a robust CAGR of 6.6%. This growth is driven by the rising demand for robust and energy-efficient computing systems.
In light of these encouraging trends, let’s look at the fundamentals of the three best Technology - Hardware stocks, beginning with number 3.
Stock #3: AstroNova, Inc. (ALOT)
ALOT engineers and distributes specialty printers, data acquisition, and analysis systems. The company’s hardware and software amalgamate advanced technologies for data acquisition, storage, analysis, and presentation across various formats. Its segments include Product Identification (PI) and Test & Measurement (T&M).
On August 1, ALOT unveiled a strategic realignment of its Product Identification (PI) segment, aimed at optimizing cost structures and operational efficiencies. This move leverages synergies with the company's subsidiary, Astro Machine, Inc., and is anticipated to yield annualized savings exceeding $2.4 million for ALOT.
In terms of trailing-12-month EV/Sales, ALOT is trading at 0.77x, 70.6% lower than the industry average of 2.63x. Also, its trailing-12-month EV/EBITDA multiple of 10.30 is 27.2% lower than the 14.14 industry average. In addition, the stock’s trailing-12-month Price/Sales of 0.61x compares with the industry average of 2.63x
For the fiscal 2024 second quarter that ended July 29, 2023, ALOT’s non-GAAP revenue increased 10.1% year-over-year to $35.52 million. Its non-GAAP gross profit grew 11.2% from the year-ago value to $12.66 million.
In addition, the company’s non-GAAP net income and non-GAAP net income per common share rose 86.5% and 87.5% from the prior year’s period to $1.09 million and $0.15, respectively.
ALOT’s shares have gained 4.1% over the past year to close the last trading session at $12.28.
ALOT’s positive fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
ALOT has a B grade for Value and Sentiment. It is ranked #16 in the 56-stock Technology - Hardware industry.
In addition to the POWR Ratings I’ve just highlighted, you can see ALOT’s ratings for Growth, Momentum, Quality, and Stability here.
Stock #2: Sharp Corporation (SHCAY)
Headquartered in Sakai, Japan, SHCAY is a manufacturer and marketer of telecommunication equipment, electric and electronic application gear, and electronic components. The company's segments include Smart Life; 8K Ecosystem; ICT; Display Device; and Electronic Device.
In terms of forward EV/Sales, the stock is trading at 0.42x, 62.9% lower than the industry average of 1.14x. In addition, SHCAY’s forward Price/Sales multiple of 0.24 is 70.5% lower than the 0.83 industry average.
For the first quarter that ended June 30, 2023, SHCAY’s cash inflow from operating activities stood at ¥9.38 billion ($62.72 million), compared to a cash outflow of ¥18.41 billion ($123.12 million) in the prior year’s period.
Moreover, its cash inflow from investing activities came in at ¥38.29 billion ($256.07 million), compared to a cash outflow of ¥9.46 billion ($63.23 million) in the previous year’s quarter. Furthermore, as of June 20, 2023, the company’s total assets amounted to ¥1.75 trillion ($11.73 billion), up from ¥1.77 trillion ($11.86 billion) as of March 31, 2023.
Analysts expect SHCAY’s revenue to grow 307.7% year-over-year to $16.83 billion for the fiscal year ending March 2024. Likewise, the company’s revenue for the next fiscal year (ending March 2025) is estimated to come in at $16.95 billion, indicating a marginal year-over-year improvement.
The stock has gained 1.7% over the past year, closing the last trading session at $1.48.
SHCAY’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
SHCAY has a B grade for Value and Quality. It is ranked #13 out of 56 stocks within the Technology – Hardware industry.
Click here to access the additional SHCAY ratings (Growth, Momentum, Stability, Sentiment, and Sentiment).
Stock #1: TransAct Technologies Incorporated (TACT)
TACT pioneers software-driven technology and printing solutions for diverse markets, encompassing food service technology, point of sale (POS) automation, and casino and gaming. Its products are meticulously crafted to meet customer specifications and are available under the BOHA!, AccuDate, EPICENTRAL, Epic, and Ithaca brands.
On May 2, TACT introduced the BOHA! Terminal 2, an FDA-compliant grab 'n go labeling solution that elevates the original BOHA! Terminal. It offers enhanced speed, print resolution, label width options, screen brilliance, and sensitivity, catering to BOHA! customers' preferences.
These improvements are expected to expand the customer base, boosting sales and revenue. Moreover, increased efficiency will lead to cost savings and enhanced profitability.
In terms of forward P/E, TACT is trading at 20.28x, 19.6% lower than the industry average of 25.22x. Furthermore, its forward EV/EBITDA multiple of 7.03 is 48.5% lower than the 13.65 industry average. Additionally, the stock’s forward Price/Sales of 0.89x compares with the industry average of 2.58x.
For the second quarter that ended June 30, 2023, TACT’s net sales increased 57.7% year-over-year to $19.61 million. Its adjusted EBITDA came in at $3.18 million, compared to a loss of $2.54 million in the prior year’s quarter.
In addition, the company’s net income and net income per common share stood at $765 million and $0.08, compared to a net loss and loss per share of $2.38 million and $0.24 in the previous year’s quarter.
The company’s revenue for the fiscal year ending December 2023 is expected to increase 24.5% year-over-year to $72.39 million. Similarly, analysts expect TACT’s EPS for the ongoing year to rise 153.3% from the prior year to $0.32. Over the past year, TACT has surged 72.1%, closing the last trading session at $6.28.
TACT’s strong outlook is apparent in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
TACT has an A grade for Value and Sentiment and a B for Quality. It has ranked #4 within the same industry.
Click here to access additional TACT ratings for Growth, Momentum, and Stability.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
SHCAY shares were trading at $1.54 per share on Wednesday afternoon, up $0.06 (+4.07%). Year-to-date, SHCAY has declined -11.75%, versus a 12.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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