Most technology stocks have witnessed an unprecedented rally over the past year thanks to the COVID-19 pandemic. Though the tech-heavy Nasdaq posted its biggest single-day gain since November 4, 2020 yesterday, after suffering losses in the recent past on investor concerns about the high valuations of tech stocks and rising bond yields, many analysts fear that the sector’s price bubble has yet to burst.

That does not mean that betting on technology stocks is a bad idea now, however. Avoiding overvalued growth stocks and betting on the value stocks in the technology space could now be the best strategy. After all, the dependence on tech solutions is expected to continue even in the pandemic’s wake, which should help technology companies benefit significantly in the long run.

There are several technology stocks that are still undervalued. Vmware, Inc. (VMW - Get Rating), HP, Inc. (HPQ - Get Rating), Toshiba Corporation (TOSYY - Get Rating), and ASE Technology Holding Co. Ltd. (ASX - Get Rating) are examples. They are innovating quickly to solidify their positions in the market and their stocks are currently trading at discounts to their peers.

Vmware, Inc. (VMW - Get Rating)

VMW provides virtualization infrastructure. The company is involved in developing and commercializing software products and cloud computing solutions. VMW’s stock has gained 31.9% over the past year to close yesterday’s trading session at $144.38.

VMW  recently completed the acquisition of Datrium, a market leader in disaster recovery cloud services. The company has also released a new portfolio of products and services to help enterprise clients modernize their applications and digital infrastructure.

In terms of non-GAAP forward price/earnings, VMW is currently trading at 19.95x, which is considerably lower than the industry average 34.73x. In terms of non-GAAP forward price/sales, VMW is currently trading at 21.25x, 15.1% lower than the industry average  25.03x.

VMW is expected to see  revenue growth of 20.5% for the quarter ended April 30, 2020 and 8.1% in 2022. Its  EPS is estimated to grow 13.5% in 2023 and at a rate of 8.8% per annum over the next five years.

VMW’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary ratings system. The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.

It has a grade of A for Value and B for Quality. In the Software – Business industry, it is ranked #7 of 61 stocks.

In total, we rate VMW on eight different levels. Beyond what we stated above we have also given VMW grades for Growth, Sentiment, Stability and Momentum. Get all the VMW ratings here.

HP, Inc. (HPQ - Get Rating)

HPQ develops and markets personal computers, tablets, and laptops. The company has worldwide operations. HPQ’s stock has returned 58.8% over the past year, and the stock closed yesterday’s trading session at $30.10.

HPQ has entered  an agreement to acquire HyperX, which houses the gaming segment of Kingston Technology Company. HPQ  has also launched cloud-based environments for its printing products.

HPQ’s non-GAAP forward price/earnings of 9.12x is 63.6% lower than the industry average  25.03x. And the company’s forward price/sales of 0.62x is 83.7% lower than the industry average 3.78x.

HPQ is expected to see revenue growth of 14.8% for the quarter ended April 30, 2021 and 6.9% in 2021. Its EPS is estimated to grow 70.6% for the quarter ended April 30, 2021 and at a rate of 15.1% per annum over the next five years.

It’s no surprise that HPQ has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system. HPQ also has a grade of A for Value, and B for Momentum, Sentiment, and Quality. In the B-rated Technology – Hardware industry, it is ranked #4 of 49 stocks.

Beyond what we stated above we’ve also  given HPQ grades for Stability and Growth. Get all the HPQ ratings here.

Toshiba Corporation (TOSYY - Get Rating)

TOSYY manufactures and markets a range of electronic products, including  personal computers, televisions, and NAND flash memories. The company has a worldwide presence. TOSYY’s stock price has increased 32.3% over the past year and its last closing price was $16.85.

TOSYY is currently involved in the construction of a 300-mm wafer fabrication facility to expand its production capacity for power devices. The company’s subsidiary has received an order to supply four 350MW pumped-storage hydroelectric generator units. Its  stock is trading at a discount in terms of forward price/sales (0.53x vs. 1.54x).

TOSYY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary ratings system. TOSYY has an A grade for Value and Growth. In the B-rated Technology – Hardware industry, it is ranked #15 of 49 stocks.

Beyond what we stated above we have also  given TOSYY’s grades for Stability, Sentiment, Quality, and Momentum. Get all the TOSYY ratings here.

ASE Technology Holding Co. Ltd. (ASX - Get Rating)

ASX is involved in manufacturing semiconductors. The company operates in the packaging, testing, EMS, and estate segments. ASX’s stock has gained 67.6% over the past year to close yesterday’s trading session at $7.36.

ASX’s subsidiary recently completed the acquisition of Asteelflash Group for approximately $420 million. The acquisition will help the company expand geographically and  broaden its product portfolio.

In terms of non-GAAP forward price/earnings, ASX is currently trading at 12.98x, which is 48.1% lower than the industry average  25.03x. In terms of non-GAAP forward price/sales, ASX is currently trading at 0.79x, 79.1% lower than the industry average  3.78x.

ASX is expected to see a revenue growth of 14.9% in 2021. The company’s EPS is estimated to grow 28.6% in 2021 and at a rate of 34.2% per annum over the next five years.

It’s no surprise that ASX has an overall rating of B, which equates to Buy in our POWR Ratings system. ASX has an A grade for both Value and Sentiment and B for Momentum and Stability. In the B-rated Semiconductor & Wireless Chip industry, it is ranked #31 of 99 stocks.

Beyond what we stated above we have also  given ASX grades for Quality and Growth. Get all the ASX ratings here.

The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.

Want More Great Investing Ideas?

11 Top Stocks for March 11

9 “MUST OWN” Growth Stocks for 2021

How to Ride the 2021 Stock Market Bubble

5 WINNING Stocks Chart Patterns

VMW shares were trading at $144.51 per share on Wednesday afternoon, up $0.13 (+0.09%). Year-to-date, VMW has gained 3.03%, versus a 4.34% rise in the benchmark S&P 500 index during the same period.

About the Author: Aaryaman Aashind

Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks. More...

More Resources for the Stocks in this Article