NTCT: 2 Top Small-Cap Tech Stocks to Buy Now

The tech industry is poised to achieve new highs in 2021 because the pandemic-driven digital lifestyle is expected to continue even in the post-pandemic world. Indeed, IT services sector revenues are expected to grow at a CAGR of 4.3% over the next five years .

Most tech giants have gained significantly over the past year, capitalizing on the pandemic’s tailwinds. Given their premium pricing of services and gradual market saturation, however, these companies could witness only a modest increase in their financials in the coming months. Moreover, most companies with trillion-dollar valuations are under federal scrutiny for potential monopoly practices.

In contrast, small-cap stocks with unique services and affordable pricing are expected to witness significant demand from SMEs looking t to digitize their operations. Two such small-cap stocks, NetScout Systems, Inc. (NTCT) and Universal Electronics Inc. (UEIC), are introducing new features to attract new investments and make to collaborate with other leading companies. So, we think it could be wise to bet on them now.

NetScout Systems, Inc. (NTCT)

Based in Westford, Massachusetts NTCT provides service assurance, security, and business analytics for digital business services to guard against disruptions in availability, performance, and security. The company’s solutions are used in various service provider, enterprise and government networks. Also, NTCT’s Intelligent Data Sources provide collection and analysis of high-volume packet-flow data from across the network that is displayed through the nGeniusONE Service Assurance Solution.

In December, NTCT extended its Smart Perimeter Protection to Amazon.com, Inc.’s (AMZN) Amazon Web Services (AWS). Also in December, NTCT collaborated with AWS on packet access solutions by introducing multiple innovative ways to access packet traffic for cybersecurity and end-user experience use cases. The company has also extended its long-term partnership with Vodafone. This leverages NTCT’s InfiniStreamNG platform to help provide real-time, end-to-end visibility across Vodafone’s hybrid environment.

NTCT’s total revenues increased 11.4% sequentially to $228.7 million for its fiscal 2021 third quarter, ended December 31, 2020. The company’s revenue from the product segment increased nearly 25% sequentially to $114.97 million. Its net income was reported to be $29.02 million, which is an improvement considering the company’s $3.69 million net loss during the fiscal 2021 second quarter (ended September 30, 2020). Its non-GAAP EPS increased 73.7% sequentially to $0.66.

A consensus EPS estimate of $0.24 for the quarter ending June 30, 2021 represents an improvement of 41.2% year-over-year. Moreover, NTCT has surpassed the consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $858.11 million for the fiscal year 2022 represents a 3.3% rise on a year-over-year basis.

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The stock has gained 22.3% over the past six months and closed yesterday’s trading session at $28.76.

NTCT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The stock has an A grade for Value and B for Growth, Momentum and Quality. We have also graded NTCT for Stability and Sentiment. Click here to access all NTCT’s ratings.

NTCT is ranked #6 of 80 stocks in the Technology – Services industry.

Universal Electronics Inc. (UEIC)

Headquartered in Scottsdale, Arizona UEIC develops and manufactures pre-programmed universal wireless remote-control products, audio-video accessories, and software for home entertainment systems. The company sells its products under the One for All brand in the United States, China, Asia, Europe, Latin America, and internationally.

This month, UEIC introduced the UEI Comfort family of connected thermostats that is designed to simplify installation, daily use and ongoing support of climate control in residential, commercial and hospitality applications. UEIC also offered a QuickSet Widget this month. It combines UEIC’s unique capabilities in high-volume hardware and software. And on February 3, the company announced the offering of its Virtual Agent to provide an AI-powered integrated support framework for entertainment and smart home devices.

The company’s net sales increased 1.8% sequentially to $156.26 million for the fourth quarter ended December 31, 2020. Its gross profit increased 15.7% sequentially to $51.08 million. Its net income was reported to be $12.16 million, up more than 73% on a year-over-year basis. And its non-GAAP EPS increased 26.7% year-over-year to $1.14.

A consensus EPS estimate of $1.05 for the quarter ending June 30, 2021 represents an improvement of 18% year-over-year. Also, UEIC has surpassed the consensus EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $662.51 million for the fiscal year 2021 represents a 7.7% rise from the same period last year.

The stock has gained 35.7% over the past six months and closed yesterday’s trading session at $58.85.

UEIC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system.

The stock has an A grade for Momentum and a B grade for Sentiment, Value and Quality. We have also graded UEIC for Stability and Growth. Click here to access all UEIC’s ratings.

UEIC is ranked #1 of 43 stocks in the A-rated Technology – Electronics industry.

The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

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NTCT shares were unchanged in after-hours trading Wednesday. Year-to-date, NTCT has gained 5.51%, versus a 4.78% 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...