Equities have endured a painful year so far due to heightened inflation and the prospects of a recession. Tech stocks have fared poorly due to the Fed’s aggressive monetary tightening to bring prices down. The tech-heavy Nasdaq Composite Index has declined 29.5% year-to-date, marking its worst first half of the year ever.
Technology is changing fast, and organizations are investing in shoring up their digital capabilities irrespective of the market downturns and unprecedented global events. Investments in digitization from various sectors to keep up with the fast-changing business environment are expected to generate substantial revenues for tech companies in the long run.
The global information technology market is expected to hit $13.81 trillion by 2026, growing at a CAGR of 10.3%. The growing tech dependency, technological upgrades, and emerging technologies, such as cloud computing, artificial intelligence, extended reality, data analytics, and blockchain, are expected to drive the industry’s growth.
Given this backdrop, we think it could be profitable to buy and hold quality technology companies AudioCodes Ltd. (AUDC), Computer Task Group, Incorporated (CTG), and CTS Corporation (CTS) at the current low price levels for the long term.
AudioCodes Ltd. (AUDC)
Headquartered in Lod, Israel, AUDC is a leading vendor of advanced voice networking and media processing solutions for the digital workplace. It offers solutions, products, and services for unified communications, contact centers, VoiceAI business lines, and service provider businesses.
On April 25, 2022, the company announced that it had been approved as a partner for Microsoft’s Operator Connect Accelerator. “AudioCodes Live Cloud is the ideal SaaS solution for assisting service providers to accelerate Operator Connect customer onboarding and operations, all on a per-user per-month plan,” said Lior Aldema, Chief Business Officer at AudioCodes.
On March 16, 2022, AUDC was ranked the leading enterprise SBC vendor with an 18.5% worldwide revenue share for fiscal 2021 by Omdia. This reflects the company’s strong performance among its peers.
AUDC’s total revenues increased 12.8% year-over-year to $66.35 million for the first quarter ended March 31, 2022. The company’s gross profit increased 10.2% year-over-year to $44.36 million.
Analysts expect AUDC’s EPS and revenue for the fiscal third quarter (ending September 2022) to increase 1.8% and 12.9% to $0.39 and $71.58 million, respectively. It surpassed Street EPS estimates in three of the trailing four quarters. Over the past month, the stock has lost 3.9% to close the last trading session at $22.04.
AUDC’s POWR Ratings reflect solid prospects. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Quality and a B grade for Stability and Sentiment. It is ranked #2 out of 55 stocks in the Technology - Communication/Networking industry. Click here to see the other ratings of AUDC for Growth, Value, and Momentum.
Computer Task Group, Incorporated (CTG)
CTG offers information and technology services. It operates through three segments: North America IT Solutions and Services; Europe IT Solutions and Services; and Non-Strategic Technology Services. The company offers business process transformation solutions, technology transformation solutions, and operations transformation solutions.
On March 1, 2022, CTG partnered with VCU Health System to support their system-wide epic deployment. This reflects the growing demand for CTG's services and the company's vast market reach.
CTG’s adjusted EBITDA increased 16.3% year-over-year to $4.33 million in the first quarter ended April 1, 2022. The company’s non-GAAP operating income increased 26.2% from the year-ago value to $3.46 million, while its non-GAAP net income grew 21.6% year-over-year to $2.44 million. CTG’s non-GAAP EPS rose 23.1% from the prior-year quarter to $0.16.
For the fiscal second quarter (ending June 2022), CTG’s revenue is expected to increase marginally year-over-year to $92.50 million. Its EPS is expected to increase 30.8% to $0.17 in the to-be-reported quarter. It surpassed consensus EPS estimates in each of the trailing four quarters.
CTG has gained 7.3% over the past nine months to close the last trading session at $8.56.
CTG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. CTG also has an A grade for Value and a B for Stability, Sentiment, and Quality.
The stock is ranked #4 of 81 in the Technology - Services industry. Click here to see the ratings of CTG for Growth and Momentum.
CTS Corporation (CTS)
CTS designs, manufactures, and sells sensors, connectivity components, and actuators primarily to original equipment manufacturers (OEMs) and supplies for the aerospace and defense, industrial, medical, telecommunications, transportation, and IT markets.
On June 30, 2022, CTS acquired Ferroperm Piezoceramics. With this acquisition, the company diversified its operations in Europe, enabling it to accelerate its long-term growth prospects.
For the fiscal first quarter ended March 31, 2022, CTS’ sales increased 15% year-over-year to $147.69 million. The company’s net earnings increased 68.8% year-over-year to $20.24 million, while its adjusted EBITDA grew 35% from its year-ago value to $34.70 million. Also, its adjusted EPS came in at $0.67, representing an increase of 45.7% year-over-year.
For the quarter ending September 30, 2022, CTS’ EPS and revenue are expected to increase 21% and 16.5% year-over-year to $0.56 and $142.55 million, respectively. It surpassed consensus EPS estimates in each of the trailing four quarters, which is excellent. The stock has gained 10.2% over the past nine months to close the last trading session at $34.05.
CTS’ POWR Ratings reflect these solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It also has an A grade for Growth and Quality and a B grade for Stability and Sentiment.
Within the Technology - Electronics industry, it is ranked #2 out of 47 stocks. Click here to see the other ratings of CTS for Value and Momentum.
AUDC shares were trading at $22.20 per share on Friday afternoon, up $0.16 (+0.73%). Year-to-date, AUDC has declined -35.68%, versus a -19.50% 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.
3 Tech Stocks to Buy and Hold for the Long Term StockNews.com
