Rising Treasury yields, the Federal Reserve’s forecast to hike interest rates sooner-than-expected to combat high inflation, and the increase in jobless claims have led to the tech-heavy Nasdaq Composite losing steam this year. As a result, now could be a good time to scoop up shares of quality stocks.
The latest tech breakthroughs and growing investments in tech upgrades indicate bright long-term growth prospects for the industry. Investors’ interest in this space is evident from the Technology Select Sector SPDR ETF’s (XLK) 8.7% gains versus the SPDR S&P 500 Trust ETF’s (SPY) 7% returns over the past six months.
In addition, U.S. tech spending is expected to exceed $1.8 trillion in 2022. Therefore, it could be wise to invest in quality tech stocks Brightcove Inc. (BCOV), Information Services Group, Inc. (III), RCM Technologies, Inc. (RCMT), and Evolving Systems, Inc. (EVOL), which are currently trading below $10. These stocks are well-positioned to cash in on the industry tailwinds in the upcoming months.
Brightcove Inc. (BCOV)
With a market capitalization of $396.94 million, BCOV is a global cloud services provider for videos. It enables its customers to publish and distribute videos to Internet-connected devices. The company also offers professional support and training services. It serves sports and entertainment companies, broadcasters, publishers, corporations, government, educational institutions, retail and e-commerce platforms through direct sales, referral and channel partners, resellers, and online platforms.
On October 14, 2021, BCOV announced the acquisition of its long-term partner HapYak technology from Newsela, a leading K-12 instructional content platform, to help advance video interactivity. Integration of the HapYak technology will enable BCOV to generate valuable data-driven insights for businesses and dramatically enhance their viewer engagement, onboard employees more effectively, and close more sales faster. BCOV is looking forward to witnessing high demand in the coming months.
BCOV’s total revenues for its fiscal 2021 third quarter, ended September 30, 2021, increased 6.3% year-over-year to $52.16 million. The company’s non-GAAP gross profit came in at $34.12 million, indicating an 8.2% rise from the prior-year period. It had $45.29 million in cash and cash equivalents as of September 30, 2021.
Analysts expect the company’s revenue to increase 6.4% year-over-year to $210 million in the fiscal year 2021, ended December 31, 2021. It surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive. BCOV’s EPS is expected to grow at a 15% rate per annum over the next five years.
Over the past month, the stock has gained 3.7% to close yesterday’s trading session at $9.66. In terms of forward EV/Sales, BCOV is currently trading at 1.74x, 57.1% lower than the 4.06x industry average. Likewise, the stock’s 1.93x forward Price/Sales is 51.2% lower than the industry average of 3.95x.
BCOV’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
BCOV has an A grade for Value and a B grade for Quality and Sentiment. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for BCOV’s Momentum, Stability, and Growth here. BCOV is ranked #18 of 166 stocks in the Software – Application industry.
Information Services Group, Inc. (III)
III is a technology research and advisory firm specializing in digital transformation services, sourcing advisory, managed governance and risk, network carrier, technology strategy, operations design, and market intelligence and technology research and analysis services worldwide. It has a market capitalization of $331.19 million.
III’s adjusted revenue for its fiscal 2021 third quarter ended September 30, 2021, increased 14.3% year-over-year to $70.11 million. The company’s non-GAAP operating income came in at $7.01 million, indicating a 146.1% year-over-year improvement. III’s non-GAAP net income came in at $5.95 million, up 14.1% from their year-ago period. Its non-GAAP EPS increased 20% year-over-year to $0.12. The company had $54.50 million in cash and cash equivalents as of September 30, 2021.
The consensus EPS estimate of $0.43 for fiscal 2021 ended December 31, 2021, represents a 53.6% rise from the prior-year period. It surpassed the consensus EPS estimates in each of the trailing four quarters. Analysts expect III’s revenue to rise 10.9% year-over-year to $276.22 million in the same fiscal year. III’s EPS is expected to grow at a rate of 16% per annum over the next five years.
Over the past month, the stock has declined 5.3% and ended yesterday’s trading session at $6.76. III’s 1.31x forward EV/Sales is 67.6% lower than the 4.06x industry average. In terms of forward EV/EBITDA, the stock is currently trading at 9.53x, 42.4% lower than the industry average of 16.55x.
III’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. III has an A grade for Sentiment and a B grade for Growth, Value, and Quality. Click here to see the additional ratings for III’s Stability and Momentum.
The stock is ranked #1 of five stocks in the A-rated Outsourcing – Management Services industry.
RCM Technologies, Inc. (RCMT)
RCM provides business and technology solutions through engineering, specialty healthcare, and information technology services. The company serves aerospace and defense, energy, financial services, health care, life sciences, manufacturing and distribution, technology industries, educational institutions, and the public sector. It has a 69.19 million market capitalization.
RCMT’s revenues for its fiscal 2021 third quarter ended October 2, 2021, increased 44.1% year-over-year to $45.47 million. The company’s gross profit came in at $12.21 million, indicating a 38.5% rise from the year-ago period. Its operating income came in at $3.73 million, compared to a loss of $158,000 in the prior-year period. RCMT’s net income came in at $2.75 million for the quarter, versus a $244,000 loss per share in the year-ago period. Its EPS came in at $0.24, compared to a $0.02 loss per share in the prior-year period. The company had $2.82 billion in cash and cash equivalents as of October 2, 2021.
Analysts expect the company’s EPS to be $0.58 for the fiscal year 2021 ended December 31, 2021, representing a 179.5% rise from the prior-year period. The consensus revenue estimate of $190.06 million for the same fiscal year indicates a 26.4% year-over-year improvement. RCMT’s EPS is expected to grow at a rate of 15% per annum over the next five years.
Over the past month, the stock has gained 12.4% and closed yesterday’s trading session at $6.60. RCMT’s 0.43x forward EV/Sales is 78.5% lower than the 2.02x industry average. In terms of forward Price/Sales, RCMT is currently trading at 0.38x, 76.7% lower than the industry average of 1.65x.
RCMT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. It has an A grade for Growth and Value and a B grade for Sentiment and Quality. Click here to see the additional ratings for RCMT (Stability and Momentum).
RCMT is ranked #3 in the Outsourcing – Staffing Services industry.
Evolving Systems, Inc. (EVOL)
With a $25.62 million market capitalization, EVOL provides real-time digital engagement solutions and services to the wireless carrier and consumer financial service markets internationally. The company offers customer retention and loyalty solutions that reduce churn, extend the customer lifecycle, and generate revenue from existing subscribers. It also provides marketing advisory, IT, managed services, and customer value management solutions.
On January 5, 2022, PartnerOne, an enterprise software company, completed the acquisition of all the assets of its Customer Acquisition and Network Services division (Activation) as well as its CVML and Loyalty business (Marketing). EVOL’s proprietary technology and industry expertise have helped many popular telecommunications companies and other Communications Service Providers (CSPs) deliver improved experiences to their customers. EVOL will solidify PartnerOne’s position as a global leader, and its customers will benefit from improved products and services that exceed the rigorous demands of its market.
EVOL’s total revenue for its fiscal 2021 third quarter, ended September 30, 2021, increased 3% year-over-year to $6.97 million. The company’s income from operations came in at $559,000, up 43% from the prior-year period. It had $3.58 million in cash and cash equivalents as of September 30, 2021.
Over the past month, the stock has gained 1.4% and closed yesterday’s trading session at $2.09. The stock’s 0.90x trailing-12-month EV/Sales is 79.3% lower than the 4.33x industry average. In terms of trailing-12-month Price/Sales, EVOL is currently trading at 0.99x, 75.3% lower than the industry average of 3.99x.
It is no surprise that EVOL has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Value and Quality. Click here to see the additional ratings for EVOL’s Sentiment, Momentum, Growth, and Stability.
EVOL is ranked #20 of 128 stocks in the Software – Application industry.
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BCOV shares were trading at $9.75 per share on Wednesday afternoon, up $0.09 (+0.93%). Year-to-date, BCOV has declined -4.60%, versus a -3.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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