The tech sell-off this year has brought down the sector’s valuations to attractive levels. “We are seeing some of the most attractive valuations for this space that we’ve seen in a long time,” Jack Janasiewicz, lead portfolio strategist at Natixis Investment Managers Solutions, said.
Despite recession concerns, tech spending does not seem to slow. According to a CNBC Technology Executive Council survey, more than three-quarters of tech leaders expect their organizations to spend more this year.
On top of it, “Mad Money” host Jim Cramer believes that the recent tech sector rally could turn into a long-term recovery. He also added that an economic downturn could increase the demand for tech company services.
Given this backdrop, we think tech stocks AstroNova, Inc. (ALOT), Computer Task Group, Incorporated (CTG), and Seiko Epson Corporation (SEKEY), which are currently trading at a low valuation, might be poised for a rebound soon.
AstroNova, Inc. (ALOT)
ALOT operates as a designer, developer, manufacturer, and distributor of specialty printers and data acquisition and analysis systems globally. The company functions in two segments, Product Identification (PI) and Test & Measurement (T&M).
In terms of its trailing-12-months PEG, ALOT is trading at 0.04, 91.1% lower than the industry average of 0.48x. Its trailing-12-months Price/Sales multiple of 0.73 is 75.6% lower than the industry average of 2.98.
ALOT’s net sales increased 6.6% year-over-year to $31.01 million in the fiscal first quarter ended April 30. Its operating income improved 3.9% from the prior-year period to $0.76 million. The company’s EPS came in at $0.06.
The stock has declined 11.1% year-to-date to close its last trading session at $12.00. However, it has gained 1.7% intraday.
ALOT’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ALOT is rated an A in Value and Sentiment and a B in Momentum and Quality. Within the Technology - Hardware industry, it is ranked #1 of 55 stocks. To see additional POWR Ratings for Growth and Stability for ALOT, click here.
Computer Task Group, Incorporated (CTG)
CTG provides information and technology services and operates in North America, South America, Western Europe, and India. The company operates through three segments, North America IT Solutions and Services; Europe IT Solutions and Services; and Non-Strategic Technology Services.
In terms of its forward EV/Sales, CTG is trading at 0.30, which is 89mid-% lower than the industry average of 2.67x. Its forward Price/Sales multiple of 0.34 is 87.8% lower than the industry average of 2.79.
In the first quarter that ended April 1, CTG’s non-GAAP operating income increased 26.2% year-over-year to $3.46 million, while its non-GAAP net income came in at $2.44 million, up 21.6% year-over-year. The company’s non-GAAP EPS improved 23.1% from the prior-year period to $0.16.
Analysts expect CTG’s revenue for the quarter ended June 2022 to be $92.50 million, indicating a 0.4% year-over-year growth. The company’s EPS is expected to increase 30.8% from the prior-year period to $0.17 for the same quarter.
CTG has declined 17.8% year-to-date to close its last trading session at $8.20.
It is no surprise that CTG has an overall A rating, which translates to Strong Buy in our POWR Rating system. The stock has an A grade for Value, and a B for Stability, Sentiment, and Quality. It is ranked #3 out of the 81 stocks in the Technology - Services industry.
Beyond what we’ve stated above, we have also given CTG grades for Growth and Momentum. Get all the CTG ratings here.
Seiko Epson Corporation (SEKEY)
SEKEY, headquartered in Suwa, Japan, develops, manufactures, and sells services for products in printing solutions, visual communications, and other businesses. The company operates through three broad segments, Printing Solutions; Visual Communications; and Manufacturing-related and Wearables segments.
On June 29, SEKEY subsidiary Epson Robots announced Advanced Motion & Controls Ltd (AM&C), a Canadian distributor of factory automation products and solutions, as the company’s official distributor of Epson Robots automation solutions. This is expected to grow the market across Canada by helping businesses with automation solutions.
In the same month, Epson America announced the availability of its on-demand color inkjet label printer through its authorized partners. This might add to the company’s revenue stream.
In terms of its forward EV/Sales, SEKEY is trading at 0.45, 83.1% lower than the industry average of 2.67x. Its forward Price/Sales multiple of 0.52 is 81.3% lower than the industry average of 2.79.
For the fiscal year ended March 31, SEKEY’s revenue increased 13.4% year-over-year ¥1.13 trillion ($8.31 billion). Its profit from operating activities grew 98.3% year-over-year to ¥94.48 billion ($695.16 million). The company’s profit for the period attributable to owners of the parent company rose 198.5% from the prior year to ¥92.29 billion ($679.04 million)
Analysts expect SEKEY’s revenue for the fiscal year ending March 2023 to be $9.30 billion, indicating an increase of 47.8% year-over-year.
SEKEY has declined 23.3% year-to-date but gained 1.5% intraday to close its last trading session at $7.06
This promising prospect is reflected in SEKEY’s POWR Ratings. The stock's overall A rating translates to Strong Buy in our proprietary rating system. SEKEY has an A in Value and a B in Stability and Quality. It is ranked #2 in the Technology - Hardware Industry.
Beyond what we’ve stated above, we have also given SEKEY grades for Growth, Momentum, and Sentiment. Get all SEKEY ratings here.
ALOT shares were trading at $11.80 per share on Friday afternoon, down $0.20 (-1.67%). Year-to-date, ALOT has declined -12.59%, versus a -17.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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