Despite macroeconomic concerns, the long-term prospects of the technology industry remain positive due to digitization and increased reliance on technology. Amid this backdrop, it could be wise to add fundamentally strong tech stocks Dell Technologies Inc. (DELL), LiveRamp Holdings, Inc. (RAMP) and Eltek Ltd. (ELTK) to your portfolio now.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the tech industry.
The digital transformation market is expected to reach $3.39 trillion by 2030, growing at a 19% CAGR. The increasing investments in sustainability programs in many industries, the rapid proliferation of smart devices and apps, the increasing adoption of technologies such as adaptive AI, and the continuous focus on cybersecurity all contribute to this industry's growth.
Also, global IT spending is projected to reach $5.10 trillion in 2024, a rise of 8% year-on-year. With technology advancements and a rising reliance on digital solutions, the industry is expected to grow enormously and contribute significantly to the economy.
The information technology market is anticipated to reach $1.36 trillion by 2029 at a CAGR of 14.7%. Moreover, investors’ interest in tech stocks is evident from the iShares U.S. Technology ETF (IYW) 18.5% returns over the past six months and 37.1% over the past nine months.
In light of these encouraging trends, let’s look at the fundamentals of the three above-mentioned tech stocks.
Dell Technologies Inc. (DELL)
DELL designs, develops, manufactures, markets, sells, and supports various comprehensive and integrated solutions, products, and services in the Americas, Europe, the Middle East, Asia, and internationally. The company operates through two segments, Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG).
DELL’s trailing-12-month non-GAAP P/E of 11.66x is 48.5% lower than the industry average of 22.61x. Its trailing-12-month Price/Sales of 0.59x is 77.7% lower than the industry average of 2.63x.
DELL’s trailing-12-month ROTA of 2.22% is significantly higher than the 0.09% industry average. Its trailing-12-month ROTC of 12.86% is 394.5% higher than the 2.60% industry average.
DELL’s total net revenue for the second quarter ended August 4, 2023, came in at $22.93 billion. Its non-GAAP operating income rose 1.3% year-over-year to $1.98 billion. The company’s non-GAAP net income increased 1.3% year-over-year to $1.28 billion. In addition, its non-GAAP EPS came in at $1.74, representing an increase of 3.6% year-over-year.
Analysts expect DELL’s revenue and EPS to come in at $90.81billion and $6.29 for the year ending January 2024. Shares of DELL has gained 75.1% over the past year to close the last trading session at $73.62.
DELL’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
DELL also has an A grade for Sentiment and a B for Growth and Value. It is ranked #8 out of 37 stocks in the B-rated Technology - Hardware industry. Click here for the additional POWR Ratings for Momentum, Stability and Quality for DELL.
LiveRamp Holdings, Inc. (RAMP)
RAMP is a global technology company that provides an enterprise platform for data collaboration. It enables secure and privacy-conscious sharing of first-party consumer data between companies and their business partners. RAMP’s solutions encompass data collaboration, activation, measurement and analytics, identity, and data marketplace.
On October 17, 2023, RAMP launched its new partner solution for identity integration with AWS Entity Resolution by Amazon Web Services (AWS) to increase market interoperability.
RAMP users will be able to seamlessly connect their identity data with AWS Entity Resolution as a result of this integration, resulting in a more efficient and streamlined experience.
On October 16, 2023, RAMP and Yahoo have expanded their partnership to increase ad addressability. Publishers who use RAMP's Authenticated Traffic Solution (ATS) can now improve demand by using Yahoo ConnectID. Brands using the Yahoo DSP can broaden their reach by using Yahoo ConnectID.
This agreement allows publishers using RAMP's Authenticated Traffic Solution (ATS) to leverage Yahoo ConnectID, increasing the addressability of their advertising.
RAMP’s forward Price/Book multiple of 2.45 is 35.9% lower than the industry average of 3.82. Its forward EV/EBIT multiple of 18.11 is 4.8% lower than the industry average of 19.02.
RAMP’s trailing-12-month levered FCF margin of 23.86% is 189.6% higher than the industry average of 8.24%. Its trailing-12-month gross profit margin of 72.05x is 47.4% higher than the industry average of 48.88x.
During the second quarter ended September 30, 2023, RAMP’s revenues grew 8.7% year-over-year to $159.87 billion. Its adjusted EBITDA grew 77.7% year-over-year to $32.38 billion.
Also, its non-GAAP net earnings from continuing operations amounted to $29.13 billion, up 96% from the year-ago quarter. The company’s non-GAAP EPS from continuing operations of $0.43, up 95.5% year-over-year.
The consensus revenue estimate of $635.34 million for the year ending March 2024 represents a 6.5% increase year-over-year. Its EPS is expected to grow 51.6% year-over-year to $1.30 for the same period. It surpassed EPS estimates in all four trailing quarters. Over the past year the stock has gained 58.1% to close the last trading session at $34.01.
It is no surprise that RAMP has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has a B grade for Growth, Value, Sentiment and Quality. It is ranked first among 75 stocks in the Technology – Services industry.
Beyond what is stated above, we’ve also rated RAMP for Stability and Momentum. Get all RAMP ratings here.
Eltek Ltd. (ELTK)
Headquartered in Petach Tikva, Israel, ELTK manufactures, markets, and sells printed circuit boards (PCBs) in Israel, Europe, North America, India, the Netherlands, and internationally.
ELTK’s forward EV/Sales of 1.59x is 40% lower than the industry average of 2.64x. Its forward EV/EBITDA of 8.69x is 40% lower than the industry average of 14.49x.
ELTK’s trailing-12-month net income margin of 12.99% is 634.7% higher than the 1.77% industry average. Its trailing-12-month ROCE of 25.41% is significantly higher than the 0.80% industry average.
In the third quarter ended September 30, 2023, ELTK’s revenue amounted to $11.86 million, up 14.9% year-over-year. Its gross profit and net income increased 52.1% and 113.8% year-over-year to $3.68 million and $2.15 million, respectively. The company’s EPS came in at $0.36, up 111.8% year-over-year. Moreover, its non-GAAP EBITDA grew 79.9% year-over-year to $2.61 million.
Street expects ELTK’s revenue to come in at $46.53 million for the year ending December 2023. Its EPS is expected to grow 110.9% year-over-year to $1.16 for the same period. It has surpassed EPS estimates in three of four trailing quarters. The stock has gained 240.8% over the past year to close the last trading session at $13.63.
ELTK’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #3 out of 40 stocks in the B-rated Technology - Electronics industry. It has an A grade for Sentiment and Quality and a B for Growth and Momentum. To see additional ELTK’s ratings for Value and Stability, click here.
What To Do Next?
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DELL shares fell $0.33 (-0.45%) in premarket trading Wednesday. Year-to-date, DELL has gained 88.48%, versus a 19.84% 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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