Benchmark indexes shrugged off concerns related to the spread of the COVID-19 Delta variant to close at record highs last Friday. Investors’ concerns about a potential market correction were offset by the impressive earnings reported by industry leaders. According to Factset, 24% of the S&P 500 companies reported second-quarter results as of July 23, and 88% of them beat consensus estimates, which is above the five-year 75% average. Following the stock market rout on July 19, the benchmark indexes reported four consecutive days of gains. The Dow Jones Industrial Average closed above 35,000 for the first time on July 23, while the tech-heavy Nasdaq Composite gained 3.6% over the past five days to close at record 14,846.06 points.
With remote working expected to remain the norm in the near term amid the resurgence of COVID-19 cases in several countries, the technology industry is likely to grow substantially in the coming months. In addition, the rapid digital transformation of virtually all sectors is also expected to contribute to the tech industry’s growth.
The stellar earnings growth and consequent momentum of industry-leading large-cap stocks have driven the Nasdaq Composite to record highs. Furthermore, this industry’s immense growth potential and growing investor optimism we think should propel cheap tech stocks Fujitsu Limited (FJTSY), Sharp Corporation (SHCAY), LG Display Co., Ltd. (LPL), and SolarWinds Corporation (SWI) to fresh highs soon.
Fujitsu Limited (FJTSY)
Headquartered in Tokyo, Japan, FJTSY is an information and communication technology (ICT) company worldwide. The company operates through three segments—Technology, Ubiquitous, and Device Solutions. It serves automotive, manufacturing, retail, financial services, transport, telecommunications, healthcare industries, and services providers.
On July 16, FJTSY and Inria, a French national research institute for digital science and technology, announced a new AI technology based on Topological Data Analysis (TDA) that can identify factors that contribute to anomalies in time series data. Both companies anticipate that this will contribute to analyzing the causes of data anomalies for various phenomena, clarify the mechanism surrounding it, and discover new solutions to these anomalies.
FJTSY and Digital Commodity Exchange Pte. Ltd. (DCX) forged a global strategic agreement on July 13 to accelerate the digital transformation of the global commodity trading industry. By combining DCX’s expertise in international transactions with FJTSY’s business knowledge and system design expertise in the industrial and distribution fields, the companies aim to deliver innovations by developing new global trading platforms for the agricultural, food, manufacturing, and international trading businesses. Also, FJTSY is looking forward to offering its support as a business partner, working to provide services that contribute to sustainable development goals through the power of digital technology.
For its fiscal year ended March 31, 2021, FJTSY’s operating profit increased 25.9% year-over-year to ¥266.32 billion ($2.42 billion). The company’s pre-tax profit came in at ¥291.86 billion ($2.65 billion), up 27.7% from the prior-year period. Its total comprehensive income has been reported at ¥277.09 billion ($2.52 billion), representing a 62.7% rise from the prior year period. Its EPS increased 28.1% year-over-year to ¥1012.63 ($9.18). As of March 31, 2021, the company had ¥481.83 billion ($4.37 billion) in cash and cash equivalents.
Analysts expect the company’s revenue to increase 84.5% for the current year to $33.49 billion. In terms of forward EV/Sales, FJTSY is currently trading at 1.06x, 74.4% lower than the 4.12x industry average. And in terms of forward Price/Sales, FJTSY is currently trading at 1.08x, which is 73.3% lower than the 4.03x industry average.
The stock has gained 39.4% over the past nine months and 20.5% over the past three months. It closed Friday’s trading session at $36.93.
It’s no surprise that FJTSY has an overall A rating, which translates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock also has an A grade for Value, and a B grade for Momentum, Stability, Sentiment, and Quality. Click here to see the additional POWR Ratings for FJTSY’s Growth.
FJTSY is ranked #1 of 73 stocks in the Technology – Services industry.
Sharp Corporation (SHCAY)
SHCAY is a Japan-based company that manufactures and sells consumer and industrial electronics and electronic components internationally, including solar cells and integrated circuits.
On July 19, 2021, SHCAY’s Sharp Fukuyama Semiconductor Co., Ltd. announced that it had developed the GP2AP130S00F proximity sensor, the industry’s smallest in class for wearable devices that supports the I2C communication protocol. Introducing a proprietary ambient light noise canceling circuit and a low current consumption design enables the sensor to eliminate operational faults even in outdoor environments and deliver long-duration operation on battery power. With the development, SHCAY hopes to achieve expanded market reach in the growing wearable device market.
SHCAY’s Sharp Solar Solution Asia Co., Ltd. (SSSA) subsidiary has concluded an agreement with Fuyo General Lease Co., Ltd. to establish S-Solar Generation Thailand Co., Ltd., which will sell electricity in Thailand. SSSA will install and maintain solar power systems on customers’ facilities and sell the electricity generated to the customer at a rate lower than electricity from the grid. The joint venture is expected to gain widespread recognition across Thailand amid the growing demand for solar power systems.
SHCAY’s net sales came in at ¥2.43 trillion ($22.02 billion) for its fiscal year ended March 31, 2021, which represents a 7.2% improvement year-over-year. The company’s gross profit increased 4% year-over-year to ¥421.32 billion ($3.82 billion). Its operating profit has been reported at ¥83.11 billion ($754.49 million), up 61.5% year-over-year improvement. SHCAY’s total comprehensive income increased 161.4% year-over-year to ¥105.06 billion ($953.73 million). Its EPS increased 288.1% year-over-year to ¥87.20 ($0.79). As of March 31, 2021, SHCAY had cash and cash equivalents of ¥292.79 billion ($2.66 billion).
The stock surpassed the Street’s EPS estimates in each of the trailing four quarters. The $22,69 billion consensus revenue estimate for the current year represents a 109.1% rise on a year-over-year basis.
In terms of forward EV/Sales, SHCAY is currently trading at 0.58x, which is 62.1% lower than the 1.52x industry average. In terms of forward Price/Sales, SHCAY is currently trading at 0.42x, which is 67.3% lower than the 1.28x industry average.
SHCAY has rallied 47.3% over the past year and 32.2% over the past nine months. It ended Friday’s trading session at $3.94.
SHCAY’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system.
The stock has an A grade for Value, and a B grade for Stability and Momentum. In addition to the POWR Ratings grades we’ve just highlighted, one can see SHCAY’s ratings for Growth, Quality, and Sentiment here.
SHCAY is ranked #13 of 45 stocks in the B-rated Technology – Hardware industry.
LG Display Co., Ltd. (LPL)
Based in South Korea, LPL designs, manufactures, and sells thin-film transistor liquid crystal display (TFT-LCD) and organic light-emitting diode (OLED) technology-based display panels used in TVs, monitors, mobile devices, automotive displays, and medical diagnostic equipment internationally.
On April 30, 2021, LPL joined the influential Responsible Business Alliance (RBA) to cooperate with members, supply chains, and stakeholders to enhance working and environmental conditions and improve business performance based on the RBA’s Code of Conduct. This marks the company’s first major step to strengthen its ESG management.
On January 11, LPL unveiled the next-generation OLED TV display with improved picture quality at CES 2021 to demonstrate the evolution of OLED technology. These OLED displays have been recognized and certified as comfortable for viewers’ eyes as they are flicker-free and emit low levels of blue light, which can be detrimental to eye health. LPL’s revenues came in at KRW6.88 trillion ($5.96 billion) for its fiscal first quarter, ending March 31, 2021, representing a 45.7% improvement year-over-year. The company’s gross profit increased 342.7% year-over-year to KRW1.23 trillion ($1.07 billion). LPL’s operating profit has been reported at KRW523.03 billion ($452.64 million) for the quarter, compared to a KRW361.92 billion ($313.21 million) loss in the prior-year period. Its total comprehensive income increased 571.5% year-over-year to KRW502.16 billion ($434.58 million). Its EPS came in at KRW637 ($0.55), compared to a KRW 556 ($0.48) loss in the year-ago period. The company had cash and cash equivalents of KRW3.90 trillion ($340 million).
Analysts expect the stock’s EPS to improve 254% year-over-year for the current quarter ending September 30, 2021, to $0.54. The consensus revenue estimate of $6.81 billion for the current quarter represents a 14.8% rise from the prior-year period.
In terms of forward EV/Sales, LPL’s 0.67x is 83.7% lower than the 4.12x industry average. In terms of forward Price/Sales, LPL is currently trading at 0.27x, which is 93.3% lower than the 4.02x industry average.
LPL has gained 83.1% over the past year and 43.5% over the past nine months. It closed Friday’s trading session at $9.76.
LPL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
The stock has an A grade for Value, and a B grade for Growth. To see additional POWR Ratings for LPL’s Stability, Quality, Sentiment, and Momentum, click here.
LPL is ranked #6 of 45 stocks in the B-rated Technology – Electronics industry.
SolarWinds Corporation (SWI)
SWI in Austin, Tex., provides information technology (IT) infrastructure management software products internationally. The company’s solutions enable organizations to monitor and manage the performance of their IT environments, including on-premises and hybrid models. It sells its products directly to network and systems engineers, database administrators, storage administrators, DevOps professionals, and managed service providers.
On June 10, 2021, SWI’s N-able (formerly SolarWinds MSP), a purpose-built technology partner for managed services providers (MSPs), announced the launch of MarketBuilder, a platform that provides MSPs with campaigns they can quickly and easily brand and use in their sales and marketing programs. MarketBuilder will provide N-able partners with a selection of ready-made, customizable marketing and sales campaigns they can use to promote their offerings.
With the launch of SolarWinds Database Insights for SQL Server on June 2, SWI expanded its comprehensive database performance management portfolio. Uniting the features and functionality of SWI’s Database Performance Analyzer (DPA) and SQL Sentry into a new, single licensed product, Database Insights for SQL Server provides the in-depth performance and environmental data teams need to optimize the performance of Microsoft SQL Server and other leading database platforms running on-premises, in the cloud, or in hybrid environments. SWI hopes to generate high demand for this product.
IPI’s non-GAAP total revenues for its fiscal first quarter ended March 31, 2021, increased 3.4% year-over-year to $256.98 million. The company’s non-GAAP gross profit has been reported at $231.50 million, which represents a 2.2% year-over-year improvement. While its non-GAAP net income increased 15% year-over-year to $73.49 million, its non-GAAP EPS increased 15% year-over-year to $0.23. The company had $374.35 cash and cash equivalents as of March 31, 2021.
Analysts estimate its revenue to be $268.24 million for the current quarter ending September 30, 2021, representing a 2.7% year-over-year improvement. SWI closed Friday’s trading session at $11.12.
In terms of forward EV/EBITDA, LPL’s 11.20x is 33.6% lower than the 16.87x industry average. In terms of forward Price/Sales, SWI is currently trading at 3.32x, which is 17.8% lower than the 4.03x industry average of 4.03x.
SWI’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system.
SWI has a B grade for Value, Stability, and Sentiment. In addition to the POWR Ratings grades we’ve just highlighted, one can see SWI’s ratings for Growth, Momentum, and Quality here.
SWI is ranked #5 of 59 stocks in the Software – Business industry.
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FJTSY shares were trading at $36.71 per share on Monday morning, down $0.22 (-0.58%). Year-to-date, FJTSY has gained 27.23%, versus a 18.45% 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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