The technology sector is expected to grow due to digital transformation, increased demand for innovative solutions, automation, efficiency, and enhanced customer experiences. Amid this backdrop, it could be wise to keep an eye on fundamentally strong tech stocks Infosys Limited (INFY), AstroNova, Inc. (ALOT) and Casa Systems, Inc. (CASA).
Before delving deeper into their fundamentals, let’s discuss what’s happening in the tech industry.
According to Gartner, global IT spending will reach $5.10 trillion in 2024, a rise of 8% year on year. The growing need for digital transformation across industries is driving this surge in IT spending. The IT sector is likely to increase significantly in the coming years as businesses continue to prioritize technological investments.
The information technology market is predicted to increase at a 7.9% CAGR to $119.96 trillion by 2027. The U.S. tech market accounts for 35% of the world market and is expected to grow 5.4% in 2023.
Moreover, investors’ interest in tech stocks is evident from the iShares Expanded Tech Sector ETF’s (IGM) 21% returns over the past six months and 27.7% over the past nine months.
In light of these encouraging trends, let’s look at the fundamentals of the three above-mentioned tech stocks.
Infosys Limited (INFY)
Headquartered in Bengaluru, India, INFY together with its subsidiaries, provides consulting, technology, outsourcing, and next-generation digital services in North America, Europe, India, and internationally.
INFY’s trailing-12-month ROCE of 30.89% is significantly higher than the 0.41% industry average. Its trailing-12-month ROTC of 22.81% is 803.1% higher than the 2.53% industry average.
For the fiscal second quarter ended September 30, 2023, INFY’s revenues amounted to $4.72 billion, up 3.6% year-over-year. Its gross profit rose 4.5% over the prior-year quarter to $1.45 billion. Its profit came in at $751 million, representing an increase of marginally year-over-year. However, its EPS came in at $0.18.
Analysts expect INFY’s revenue to increase 3.2% year-over-year to 18.55 billion for the year ending March 2024. Its EPS is expected to grow marginally year-over-year to $0.72 for the same period. Shares of INFY has gained 13.2% over the past six months to close the last trading session at $17.36.
INFY’s POWR Ratings reflect this optimistic outlook. The stock has an overall rating of C, equating to a Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
INFY also has a C grade for Sentiment and Momentum. It is ranked #7 out of 9 stocks in the Outsourcing - Tech Services industry. Click here for the additional POWR Ratings for Value, Growth, Stability and Quality for INFY.
AstroNova, Inc. (ALOT)
ALOT designs, develops, manufactures, and distributes specialty printers, and data acquisition and analysis systems in the United States, Europe, Asia, Canada, Central and South America, and internationally. The company operates in two segments, Product Identification (PI) and Test & Measurement (T&M).
ALOT’s trailing-12-month ROTC of 4.24% is 68% higher than the 2.53% industry average. Its trailing-12-month ROCE of 1.07% is 161.6% higher than the 0.41% industry average.
ALOT’s revenue rose 10% year-over-year to $35.52 million in the second quarter that ended July 29, 2023. The company’s non-GAAP gross profit increased 11.2% year-over-year to $12.66 million, while non-GAAP EPS rose 87.5% year-over-year to $0.15.
Over the past year the stock has gained 10% to close the last trading session at $13.51.
ALOT has an overall C rating, equating to a Neutral in our POWR Ratings system. It has a C grade for Stability, Momentum and Quality. It is ranked #19 out of 38 stocks in the Technology - Hardware industry.
Beyond what is stated above, we’ve also rated ALOT for Growth, Value and Sentiment. Get all ALOT ratings here.
Casa Systems, Inc. (CASA)
CASA is a communications technology company, provides solutions for next-generation physical, virtualized, and cloud native architectures for cable broadband, fixed-line broadband, and wireless networks in North America, Latin America, the Asia-Pacific, Europe, the Middle East, and Africa.
CASA’s trailing-12-month asset turnover ratio of 0.71x is 15% higher than the industry average of 0.62x.
For the third quarter ended September 30, 2023 CASA’s revenues came in at $62.09 million. Its total current liabilities came in at $114.43 million for the period that ended September 30, 2023, compared to $323.91 million for the period that ended December 31, 2022. Also, its total liabilities came in at $315.94 million, compared to $348.89 million for the same period.
The stock has lost marginally intraday to close the last trading session at $0.44.
CASA’s fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, which equates to a Neutral in our proprietary rating system.
It is ranked #13 out of 49 stocks in the Technology - Communication/Networking industry. It has a C grade for Growth, Stability, Momentum and Quality. To see additional CASA’s ratings for Value and Sentiment, click here.
What To Do Next?
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INFY shares were trading at $17.41 per share on Thursday morning, up $0.05 (+0.29%). Year-to-date, INFY has declined -1.16%, versus a 18.90% 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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