The technology industry is thriving thanks to emerging technologies and rapid innovation, which are revolutionizing sectors, creating new job opportunities, and increasing productivity.
Given the industry’s growth prospects, investors could consider buying fundamentally sound tech stocks Brother Industries, Ltd. (BRTHY), The Hackett Group, Inc. (HCKT), and Materialise NV (MTLS) for solid returns.
Before discussing the fundamentals of these stocks in detail, let’s see what’s driving the prospects tech industry.
The information technology market is anticipated to reach $12.42 trillion by 2028 at a CAGR of 8.3%. The market's expansion is attributed to the widespread adoption of cloud computing, AI, big data analytics, cybersecurity solutions, and IoT device expansion.
The global 3D printing industry is expected to reach $83.90 billion by 2029, with a CAGR of 24.3%. The widespread adoption of 3D printing technology in the healthcare, automotive, and aerospace industries is driving growth due to its ability to reduce production time and costs while allowing for customization and complex designs.
Furthermore, investors’ interest in tech stocks is evident from the Technology Select Sector SPDR ETF’s (XLK) 38.1% returns over the past nine months.
Considering these conducive trends, let’s take a look at the fundamentals of the three best tech stocks.
Brother Industries, Ltd. (BRTHY)
Headquartered in Nagoya, Japan, BRTHY manufactures and sells communications and printing equipment in Japan, the Americas, Europe, Asia, Oceania, the Middle East, Africa, and internationally. It operates through Printing & Solutions; Machinery; Domino; Nissei; Personal & Home; and Network & Contents segments.
BRTHY’s forward Price/Sales of 0.77x is 73.8% lower than the industry average of 2.93x. Also, its forward EV/Sales of 0.62x is 79.1% lower than the industry average of 2.95x.
BRTHY’s trailing-12-month ROCE of 5.93% is 294.3% higher than the industry average of 1.50%. Its trailing-12-month ROTA of 4.31% is 615.2% higher than the industry average of 0.60%.
During the fiscal second quarter that ended September 30, 2023, BRTHY’s revenue increased 1.2% year-over-year to ¥199.23 billion ($1.37 billion). The company’s operating profit rose 42.2% over the prior year’s quarter to ¥17.70 billion ($123.22 million). Moreover, its profit for the period and EPS amounted to ¥12.66 billion ($88.14 million) and ¥49.39.
The consensus revenue estimate of $5.57 billion for the year ending March 2024 increased 62.5% year-over-year. BRTHY’s shares have gained 14.8% over the past nine months to close the last trading session at $33.88.
BRTHY’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BRTHY also has an A grade for Stability and a B for Value, Momentum and Quality. It is ranked first among the 40 stocks in the B-rated Technology - Electronics industry. Click here for the additional POWR Ratings for Growth and Sentiment for BRTHY.
The Hackett Group, Inc. (HCKT)
HCKT operates as a strategic advisory and technology consulting firm primarily in the United States, Europe, and internationally. The company operates through three segments: Global Strategy & Business Transformation; Oracle Solutions; and SAP Solutions.
HCKT’s forward EV/EBITDA of 10.44x is 33.7% lower than the industry average of 15.73x. Its forward EV/EBIT of 13.24x is 34.9% lower than the industry average of 20.33x.
HCKT’s trailing-12-month ROCE of 29.41% is significantly higher than the 1.50% industry average. Its trailing-12-month ROTA of 19.92% is significantly higher than the 0.60% industry average.
In the third quarter that ended September 29, 2023, HCKT’s total revenues increased 5.3% year-over-year to $75.86 million, while its revenue before reimbursements rose 5.1% from the year-ago value to $74.63 million. The company’s adjusted net income came in at $11.42 million. Also, its adjusted net income per common share increased 10.8% from the prior-year period to $0.41.
Street expects HCKT’s revenue to increase 4% year-over-year to $306.81 million for the fiscal year ending December 2024. Its EPS is expected to grow 9.3% year-over-year to $1.68 for the same period. Shares of HCKT have gained 27.23% over the past nine months to close the last trading session at $23.27.
HCKT’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
HCKT has a B grade for Stability, Sentiment and Quality. It ranks first among the nine stocks in the A-rated Outsourcing - Tech Services industry. Click here to access additional HCKT ratings (Growth, Value and Momentum).
Materialise NV (MTLS)
Headquartered in Leuven, Belgium, MTLS provides additive manufacturing, medical software, and 3D printing services in the Americas, Europe, Africa, and the Asia-Pacific. The company operates through three segments: Materialise Software; Materialise Medical; and Materialise Manufacturing.
MTLS’ forward EV/Sales of 0.96x is 67.3% lower than the industry average of 2.94x. Its forward Price/Sales of 1.21x is 58.3% lower than the industry average of 2.91x.
MTLS’ trailing-12-month asset turnover ratio of 0.63x is marginally higher than the industry average of 0.62x. Its trailing-12-month CAPEX / Sales of 4.89% is 105.6% higher than the industry average of 2.38%.
For the fiscal third quarter that ended September 30, 2023, MTLS’ revenue increased 3.2% year-over-year to €60.13 million ($63.70 million), while its gross profit rose 5.2% from the prior-year quarter to €33.70 million ($35.70 million).
The company’s net profit for the period improved 184% from the year-ago value to €4.01 million ($4.25 million). Also, its adjusted EBITDA came in at €7.86 million ($8.57 million), up 54.9% from the prior-year quarter.
Analysts expect MTLS’ revenue to come in at $313.28 million for the year ending December 2024, indicating an increase of 10.3% year-over-year. Its EPS is expected to grow at 57.9% year-over-year to $0.18 for the same period. The stock has gained 11.7% over the past three months to close the last trading session at $5.83.
MTLS has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Growth, Value and Sentiment. It is ranked first among the five stocks in the B-rated Technology - 3D Printing industry.
Beyond what is stated above, we’ve also rated MTLS for Stability, Momentum and Quality. Get all MTLS ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
BRTHY shares were trading at $33.52 per share on Monday afternoon, down $0.36 (-1.06%). Year-to-date, BRTHY has gained 7.37%, versus a 2.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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