The continuing spread of the Delta variant of the COVID-19 in several countries may compel many businesses to return to fully remote operations. Also, several enterprises are adopting a hybrid working model as a long-term solution. So, an increasing need for devices to stay operational remotely and the rising demand for high-capacity data storage devices amid the global digital transformation of almost every industry should keep driving the computer hardware industry’s growth.
The global computer hardware market is expected to grow at 6% CAGR to reach $1.18 trillion by 2025.
Given this backdrop, we believe that undervalued computer hardware stocks HP Inc. (HPQ), Toshiba Corporation (TOSYY), Lenovo Group Limited (LNVGY), and Sharp Corporation (SHCAY) will hit fresh highs soon, based on their strong fundamentals and innovations.
HP Inc. (HPQ)
HPQ, Palo Alto, Calif., provides personal computing and other access devices, imaging and printing products, and related technologies, software, solutions, and services to individual consumers, small- and medium-sized businesses, and enterprises, including customers in the government, health, and education sectors worldwide.
On June 29, HPQ unveiled its lightest consumer laptop, the HP Pavilion Aero 13 Laptop PC. Weighing less than 1 kilogram, the Pavilion Aero 13 delivers a flawless sustainable design with the power to be entertained, connected, and productive. Made with recycled ocean-bound plastics, the HP M24fwa FHD Monitor and HP M27fwa FHD Monitor has been added to HPQ’s M-Series line of monitors featuring built-in audio. As demand for efficient and lightweight devices surges amid the remote lifestyle trend, HPQ expects to generate healthy sales with this product in the coming months.
HPQ completed the acquisition of HyperX, the gaming division of Kingston Technology Company, on June 1. This acquisition supports HPQ’s strategy to drive growth in its Personal Systems business, where gaming and peripherals are attractive segments.
For its fiscal second quarter, ended April 30, 2021, HPQ’s net revenues increased 27.3% year-over-year to $15.88 billion. The company’s earnings from operations came in at $1.44 billion, up 53.7% from the prior-year period. Its non-GAAP net earnings were $1.16 billion, representing a 56.3% rise from the prior year period. Its non-GAAP EPS increased 82.4% year-over-year to $0.93. As of April 30, 2021, the company had $3.42 billion in cash and cash equivalents.
Analysts expect HPQ’s EPS to improve 70.9% year-over-year to $0.84 for its current quarter, ending July 31, 2021. The stock surpassed the Street’s EPS estimates in each of the trailing four quarters. The $15.89 billion consensus revenue estimate for the current quarter represents an 11.2% rise on a year-over-year basis. Analysts expect the stock’s EPS to grow at 17% per annum over the next five years.
In terms of forward EV/Sales, HPQ is currently trading at 0.60x, which is 85.6% lower than the 4.14x industry average. In terms of forward Price/Sales, HPQ is currently trading at 0.54x, which is 86.5% lower than the 4x industry average.
The stock has gained 62.7% over the past year and 56.1% over the past nine months. It closed yesterday’s trading session at $28.48.
It’s no surprise that HPQ has an overall B rating, which translates to 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 Growth and Quality. Click here to see the additional POWR Ratings for HPQ (Momentum, Stability, and Sentiment). HPQ is ranked #5 of 45 stocks in the B-rated Technology – Hardware industry.
Note that HPQ is one of the few stocks handpicked by our Chief Value Strategist, David Cohne, currently in the POWR Value portfolio. Learn more here.
Toshiba Corporation (TOSYY)
Based in Tokyo, Japan, TOSYY provides electronic devices and storage, and digital solutions worldwide. In addition, the company offers retail and printing solutions, energy systems and solutions, infrastructure systems and solutions, and building solutions.
On June 11, TOSYY launched an updated solid-state LiDAR that achieves the world’s smallest volume, robust vibration, and wind resistance while maintaining a maximum detection range of 200m and the highest resolution of any sensor of similar size. The company expects this new LiDAR will advance progress and create demand in autonomous driving and transportation infrastructure monitoring markets.
TOSYY’s Toshiba Infrastructure Systems & Solutions Corporation entered a strategic business alliance and invested $15 million in Fortem Technologies, Inc., a drone security company, on March 23. TOSSY had commercialized a drone detection system that plots incoming direction and altitude from radio waves emitted by the drone in flight. With this partnership, TOSYY aims to expand its radar-based security solutions business.
TOSYY’s income from operations came in at $1.26 billion for its fiscal year ended March 31, 2021, compared to a $436.14 million loss in the prior-year period. The company’s total comprehensive income has been reported at $1.23 billion, compared to a $241.59 million loss in the year-ago period. Its EPS was $2.26, versus a $2.17 loss per share in the prior-year period. The company had $4.73 billion in cash and cash equivalents as of March 31, 2021.
Analysts expect the stock’s revenue to improve 4228% year-over-year for the current year to $29.44 billion. In terms of forward EV/Sales, TOSYY’s 0.71x is 64.2% lower than the 1.97x industry average. In terms of forward Price/Sales, TOSYY is currently trading at 0.67x, which is 58.5% lower than the 1.60x industry average.
TOSYY has gained 64.2% over the past nine months and 32.3% over the past six months. It closed yesterday’s trading session at $21.85.
TOSYY’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 and Stability. To see additional POWR Ratings for TOSYY’s Quality, Sentiment, and Momentum, click here. TOSYY is ranked #15 in the Technology – Hardware industry.
Lenovo Group Limited (LNVGY)
LNVGY is a Hong Kong-based investment holding company that develops, manufactures, and markets technology products and services worldwide. It also provides data center equipment, such as servers and storage, and offers IT services and contracting manufacturing.
On July 12, 2021, LNVGY announced the next generation of its family of entry-level desktop workstations—theThinkStation P350 Tower, Small Form Factor (SFF), and Tiny. This trio of workstations is equipped with support for PCIe Gen 4 for faster access to cutting-edge storage technologies, as well as enhanced professional graphics support. LNVGY expects the offering of versatile, flexible, and ISV-certified performance will gain widespread recognition across the industry.
For enhancing esports experiences, on May 11, LNVGY’s Lenovo Legion introduced the new 16-inch flagship Lenovo Legion 7i, the powerful new 16-inch Lenovo Legion 5i Pro, and the new 15-inch and 17-inch Lenovo Legion 5i to its lineup of portable gaming PCs, running on Microsoft’s (MSFT) Windows 10 and featuring Intel’s (INTC) and NVIDIA’s (NVDA) latest technologies. These Intel-powered gaming laptops are supported by Thunderbolt 4 for more reliable display connections, quicker charging, and data transfers. These laptops are expected to create high demand among gamers in the coming months.
LNVGY’s revenues for its fiscal fourth quarter, ended March 31, 2021, increased 47.7% year-over-year to $15.63 billion. The company’s gross profit has been reported at $2.69 billion, representing a 44.4% year-over-year improvement. Its operating profit came in at $479 million, up 188.6% from the prior-year period. While its net profit increased 352.4% year-over-year to $285 million, its EPS increased 454.3% year-over-year to $1.94. The company had $3.07 billion in cash and cash equivalents as of March 31, 2021.
Analysts estimate LNVGY’s revenue to be $16.63 billion for the current quarter ending September 30, 2021, which represents a 14.5% year-over-year improvement. In terms of forward EV/EBITDA, LNVGY’s 0.21x is 95% lower than the 4.14x industry average. In terms of forward Price/Sales, LNVGY is currently trading at 0.17x, which is 95.7% lower than the 4x industry average.
LNVGY has gained 59.3% over the past year and 46.9% over the past nine months. It closed yesterday’s trading session at $18.86.
LNVGY’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system.
LNVGY has an A grade for Value, and a B grade for Growth and Stability. In addition to the POWR Ratings grades we’ve just highlighted, one can see LNVGY’s ratings for Sentiment, Momentum, and Quality here. LNVGY is ranked #9 in the Technology – Hardware industry.
Sharp Corporation (SHCAY)
Headquartered in Saiko, Japan, SHCAY manufactures and sells consumer and industrial electronics and electronic components, including solar cells and integrated circuits internationally.
This month SHCAY’s Sharp Fukuyama Semiconductor Co., Ltd. unveiled its 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 enable long-duration operation on battery power, respectively. SHCAY hopes to achieve expanded market reach in the growing wearable device market.
SHCAY’s Sharp Solar Solution Asia Co., Ltd. (SSSA) subsidiary 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 customers 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. 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 ($0.80). As of March 31, 2021, SHCAY had cash and cash equivalents of ¥292.79 billion ($267 million) .
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 61.8% lower than the 1.52x industry average. In terms of forward Price/Sales, SHCAY is currently trading at 0.42x, which is 67.2% lower than the 1.29x industry average. SHCAY has rallied 45.3% over the past year and 28.8% over the past nine months. It ended yesterday’s trading session at $3.87.
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 Technology – Hardware industry.
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HPQ shares were trading at $27.93 per share on Tuesday afternoon, down $0.55 (-1.93%). Year-to-date, HPQ has gained 15.05%, versus a 17.53% 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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