Tech stocks have suffered their worst sell-off since 2008 so far this year, with the benchmark tech-heavy Nasdaq Composite index slumping 7.7% year-to-date. The Fed’s hawkish stance, exacerbated supply chain disruptions, and a continuing semiconductor shortage amid geopolitical tensions caused a market correction earlier this year in which tech stocks were among the worst affected.
Nevertheless, an increased dependency on technology, and disruptive advancements in this space, should allow the industry to have a stellar rebound soon. And with COVID-19 cases resurgent in various parts of the world, the remote working trend will likely continue in the near term, boosting the demand for tech products and services.
Because the markets remain volatile, we think investing in fundamentally sound yet cheap tech stocks Teradata Corporation (TDC), Cognyte Software Ltd. (CGNT), and AstroNova, Inc. (ALOT) could be wise.
Teradata Corporation (TDC)
TDC is a connected multi-cloud data platform for enterprise analytics companies. Its Teradata Vantage platform is designed to run across on-premises, private and public cloud environments, integrating and simplifying data and analytics ecosystems. The San Diego, Calif.-based concern operates through seven geographic segments: North America; Latin America; Europe; Japan; the Middle East; Africa; and Asia Pacific.
On February 9, TDC agreed to an accelerated share repurchase of $250 million worth of its common stock. Such share repurchases should boost shareholder returns significantly.
On January 18, TDC announced the cloud migration of Telefónica España’s on-premises data analytics ecosystem to Vantage. This move should continue to enable TDC to leverage Telefónica’s capabilities in achieving its analytical goals.
During the fourth quarter, which ended Dec. 31, 2021, TDC’s recurring revenue increased 5% year-over-year to $ 364 million. Its non-GAAP operating income rose 34% from its year-ago value to $90 million. The company’s non-GAAP net income increased 52% year-over-year to $64 million, while its non-GAAP EPS grew 50% from the prior-year quarter to $0.57.
TDC is relatively undervalued compared to its peers. The stock’s 2.70 forward Price/Sales multiple is 19% lower than the 3.33 industry average. In addition, its 11.32 forward EV/EBITDA ratio is 15.7% lower than the 13.42 industry average.
Analysts expect TDC’s EPS and revenue to increase 19.6% and 5%, respectively, year-over-year to $2.28 and $2.03 billion in its fiscal 2023 (ending Dec. 31, 2023). The company has an impressive earnings surprise history, it surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 29.7% in price over the past year to close yesterday’s trading session at $49.82.
TDC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which translates to Strong Buy in our proprietary rating system. TDC also has an A grade for Value and Quality. The stock is ranked #8 of 78 stocks in the Technology – Services industry.
In addition to the POWR Ratings grades I have just highlighted, one can see the TDC ratings for Growth, Stability, Sentiment, and Momentum here.
Cognyte Software Ltd. (CGNT)
Headquartered in Israel, CGNT designs and commercializes security and analytics software. It offers investigative analytics, operational intelligence analytics, and threat intelligence analytics solutions to government agencies and enterprises with Actionable Intelligence.
On Dec. 16, 2021, CGNT was named a leader in Frost & Sullivan’s 2021 Digital Intelligence Solutions Report. This recognition depicts CGNT’s strong innovation and growth in the digital intelligence market.
CGNT’s net revenue increased 4.8% year-over-year to $118.36 million in the third quarter, ended Oct. 31, 2021. Its gross profit grew 4.6% from its year-ago value to $86.08 million.
CGNT stock is relatively undervalued compared to its peers. In terms of forward non-GAAP P/E, CGNT is currently trading at 14.53x, which is 27.6% lower than the 20.06x industry average. Its 1.61 forward EV/Sales multiple is 53.3% lower than the3.44x industry average.
CGNT’s EPS and revenue are expected to increase 15.3% and 9.3%, respectively, year-over-year to $0.20 and $127.14 million for the fiscal second quarter (ending July 31, 2022). It surpassed consensus EPS estimates in each of the trailing four quarters.
Over the past month, the stock has gained 2.7% in price to close the last trading session at $11.60.
It is no surprise that CGNT has an overall B rating, which translates to Buy in our POWR Ratings system. In addition, CGNT has an A grade for Value and Sentiment and a B grade for Growth. Also, it is ranked #15 of 162 stocks in the Software – Application industry.
Click here to see CGNT ratings for Quality, Momentum, and Stability.
AstroNova, Inc. (ALOT)
ALOT manufactures and distributes a range of specialty printers and data acquisition and analysis systems. The West Warwick, R.I.-based company operates through two segments: Product Identification; and Test & Measurement. It sells its products via its own sales and authorized dealers as well as through third-party dealers and representatives.
In its fiscal 2022 third quarter (ended Oct. 30, 2021), ALOT’s net revenue increased 3% year-over-year to $28.86 million. Its gross profit rose 6.7% from its year-ago value to $10.39 million, while its gross profit margin came in at 36% compared to 34.7% in the prior-year quarter. The company’s bookings increased 16% year-over-year to $32.30 million.
ALOT’s stock is trading at a discount to its peers. The stock’s 0.95 forward EV/sales multiple is 72.4% lower than the 3.44 industry average. In addition, ALOT’s forward Price/ Sales and EV/EBITDA ratios of 0.93 and 7.84, respectively, are significantly lower than the 3.33 and 13.42 industry averages.
The $29.69 million consensus revenue estimate for the about-to-be-reported quarter represents a 0.9% increase from the same period last year. Shares of A LOT have gained 11.1% in price year-to-date, closing the last trading session at $15.
ALOT’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. It also has an A grade for Value and Sentiment and a B grade for Momentum and Quality. Also, it is ranked #1 of 49 stocks in the Technology – Hardware industry.
To see additional POWR Ratings for Growth and Stability for ALOT, click here.
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TDC shares were trading at $50.01 per share on Thursday afternoon, up $0.19 (+0.38%). Year-to-date, TDC has gained 17.75%, versus a -3.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More...
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