The technology sector bore the brunt amid a plethora of macroeconomic challenges and geopolitical turmoil last year. However, it is anticipated to maintain an upward trajectory after its recovery in the first quarter of 2023, thanks to the rising adoption of modernized technology.
Given this backdrop, let us explore tech stocks KVH Industries, Inc. (KVHI), AstroNova, Inc. (ALOT), and TransAct Technologies Incorporated (TACT) now.
But let’s first discuss the tech sector briefly before we delve deeper into the fundamentals of the stocks mentioned above.
The tech sector staged a massive comeback in the first quarter of 2023 amid various jitters, such as the Fed’s incessant rate hikes, stubbornly high inflation, banking turmoil, and geopolitical crisis.
Moving ahead, experts anticipate the sector to maintain its momentum on the backs of increased spending due to the realization of the benefits of investing in digital transformation.
The traditional data management and analysis environment has been transformed by advancements in storage, processors, and network technology. The growth of the tech hardware industry is mainly driven by increased spending by organizations, technological innovations, delivery of consistent product quality, and meeting the soaring demands for high-performance processors and hardware accelerators.
As per Statista, global IT spending is expected to reach $4.50 trillion in 2023, increasing by 2.4% compared to 2022, and around $685 billion will be spent on devices.
The global IT hardware market is expected to grow by registering a CAGR of 6.1% between 2022 and 2027. Moreover, the global edge AI hardware market size is projected to reach a revenue of around $7.98 billion by 2032, at a CAGR of 21.4% between 2023 and 2032.
Investors could buy technology hardware stocks KVHI, TACT, and ALOT, with strong fundamentals, capitalizing on industry tailwinds.
KVH Industries, Inc. (KVHI)
KVHI, together with its subsidiaries, designs, develops, manufactures, and markets mobile connectivity products and services for the marine and land mobile markets in the United States and internationally.
KVHI’s trailing-12-month net income margin of 20.64% is 946.3% higher than the 1.97% industry average. Its trailing-12-month ROTA of 15.09% is significantly higher than the 0.26% industry average.
KVHI’s EBITDA has grown at a 29.8% CAGR over the past five years. Moreover, its tangible book value and total assets grew at 7.4% and 0.2% CAGRs over the past three years, respectively.
For the fiscal first quarter that ended March 31, 2023, KVHI’s net sales increased marginally year-over-year to $33.69 million. Its service revenue grew 8.1% year-over-year to $28.74 million. Furthermore, its total cost and expenses came in at $34.24 million, down 8.5% year-over-year.
Its non-GAAP adjusted EBITDA from continuing operations came in at $3.27 million, up 82.3% year-over-year. Moreover, its total current liabilities stood at $27.78 million, as of March 31, 2023, compared to $38.87 million as of December 31, 2022.
Street expects KVHI’s revenue and EPS to increase 10.8% and 133.3% year-over-year to $38.95 million and $0.14, respectively, in the fiscal third quarter ending September 2023.
Moreover, for the fiscal year ending December 2023, its revenue and EPS are expected to grow 7.8% and 315.4% year-over-year to $149.75 million and $0.36, respectively.
Over the past year, the stock has gained 22.7% to close its last trading session at $9.63.
KVHI’s POWR Ratings reflect its robust outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It also has an A grade for Growth and a B for Sentiment. Within the 43-stock Technology - Hardware industry, it is ranked #15.
Beyond what we have highlighted above, click here for KVHI’s additional POWR Ratings (Value, Momentum, Stability, and Quality).
AstroNova, Inc. (ALOT)
ALOT designs, develops, manufactures, and distributes specialty printers and data acquisition and analysis systems worldwide. The company operates in two segments, Product Identification (PI) and Test & Measurement (T&M).
ALOT’s trailing-12-month ROCE and ROTC of 3.71% and 4.08% are 636.6% and 145% higher than the 0.50% and 1.66% industry averages, respectively. Its 2.22% trailing-12-month ROTA is significantly higher than the 0.02% industry average.
ALOT’s revenue has grown 4.7% and 4.1% CAGRs over the past three and five years, respectively. Moreover, its EBIT and net income grew at 121.7% and 84.5% CAGRs over the past three years, respectively.
For the fiscal first quarter that ended April 29, 2023, ALOT’s net revenue increased 14.2% year-over-year to $35.42 million, while its gross profit increased 15.4% from the prior-year period to $12.39 million. Its operating income increased 91.2% year-over-year to $1.46 million.
Moreover, its net income and net income per share came in at $848 and $0.11, representing an increase of 99.5% and 83.3% year-over-year, respectively. Also, its adjusted EBITDA came in at $3.05 million, up 59.9% from the prior-year quarter.
Over the past year, the stock has gained 28.9% to close the last trading session at $14.80. Over the past six months, it has gained 24.4%.
ALOT’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to Buy in our proprietary rating system.
It has a B grade for Growth, Value, and Sentiment. It is ranked #4 within the same industry.
Click here to see the additional ratings of ALOT for Momentum, Stability, and Quality.
TransAct Technologies Incorporated (TACT)
TACT designs, develops, and markets transaction-based and specialty printers and terminals worldwide. It offers thermal printers and terminals to generate labels, coupons, and transaction records, such as receipts, tickets, and other documents, as well as printed logging and plotting of data.
Last month, TACT announced the launch of its all-new BOHA! Terminal 2 food safety and FDA-compliant grab ‘n go labeling solution. The BOHA! Terminal 2 improves on the original BOHA! Terminal with more speed, print resolution, label widths, screen brightness and sensitivity, and more flexibility.
With the innovative hardware, TACT is anticipated to maintain its operational excellence.
TACT’s trailing-12-month ROTA of 2.98% is significantly higher than the 0.02% industry average. Its trailing-12-month ROCE and ROTC of 4.29% and 2.74% are 751.3% and 64.9% higher than the industry averages of 0.50% and 1.66%, respectively.
TACT’s revenue has grown at 16.7% and 5.3% CAGRs over the past three and five years, respectively. Moreover, its total assets grew at a 13.3% CAGR over the past three years.
For the fiscal first quarter that ended March 31, 2023, TACT’s net sales stood at $22.27 million, up 129.5% year-over-year, whereas its gross profit increased 377.6% from the prior-year quarter to $12.26 million. Also, its operating income for the quarter came in at $3.81 million, compared to an operating loss of $5.60 million in the year-ago quarter.
Its net income and net income per common share came in at $3.14 million and $0.31, compared to its net loss and net loss per common share of $4.35 million and $0.44, respectively, in the prior-year quarter. TACT’s adjusted EBITDA came in at $4.46 million, compared to its adjusted EBITDA loss of $5.12 million in the previous-ago quarter.
TACT’s revenue for the fiscal second quarter ending June 2023 is expected to increase 46.3% year-over-year to $18.47 million, whereas EPS is expected to come in at $0.07. Moreover, it surpassed the consensus revenue and EPS estimates in all of the trailing four quarters, which is promising.
Moreover, for the fiscal year 2023, the company expects its total adjusted EBITDA to come between $6.5 million and $7.5 million.
Over the past year, the stock has gained 119.8% to close the last trading session at $9.10. The stock gained 4.4% intraday.
It is no surprise that TACT has an overall rating of B, which translates to Buy in our proprietary rating system.
The stock has an A grade for Sentiment and a B for Growth and Value. It is ranked #3 within the same industry.
To see the additional ratings of TACT for Momentum, Stability, and Quality, click here.
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KVHI shares were trading at $9.73 per share on Wednesday morning, up $0.10 (+1.04%). Year-to-date, KVHI has declined -4.79%, versus a 14.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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