The technology industry is growing significantly due to consistent advancements and the integration of cutting-edge technologies. Given the favorable industry trends, quality tech stocks Wolters Kluwer N.V. (WTKWY), Teledyne Technologies Incorporated (TDY), and NetApp, Inc. (NTAP) look poised to gain this month and beyond.
Globally, the increased IT spending, coupled with the widespread adoption of software-as-a-service and increased cloud-based offerings, is boosting the industry. Also, IT cloud services are expected to witness growth due to the massive cloud deployments across the end-user industries. Global IT Services market is expected to grow at a CAGR of 8.4% until 2028.
Additionally, the global electronic components market is expected to grow at a CAGR of 6.8% to reach $368.40 billion by 2032. Increasing demand for consumer electronics, the rollout of 5G networks and, the growth of high-speed data communication, advancements in IoT, and increasing industrial automation, are expected to drive growth in the market.
Furthermore, the increasing need to store data amid the growing usage of data analytics, AI, blockchain, IoT, cloud computing, and all Internet-based services is driving demand for advanced hardware. The IT hardware market is projected to grow at a CAGR of 7.9% to reach $177.11 billion by 2028.
With these favorable trends in mind, let's delve into the fundamentals of the three best technology stock picks mentioned above.
Wolters Kluwer N.V. (WTKWY)
Based in Alphen aan den Rijn, the Netherlands, WTKWY provides professional information, software solutions, and services in the Netherlands, rest of Europe, the United States, Canada, the Asia Pacific, and internationally. The company operates through four segments: Health; Tax & Accounting; Governance, Risk & Compliance; and Legal & Regulatory.
On November 19, 2023, WTKWY & Accounting (TAA) Asia Pacific (APAC) announced the launch of CCH iKnowConnect, a cloud-based platform that provides a 360-degree view of legislation, streamlining the research process for tax and legal professionals. With continued investments in transformative innovation and advanced technologies, CCH iKnowConnect is a unified state-of-the-art platform experience changing the way professionals work.
WTKWY’s trailing-12-month EBIT margin of 22.82% is 134.6% higher than the industry average of 9.73%, while its trailing-12-month levered FCF margin of 19.91% is 228.1% higher than the industry average of 6.07%.
WTKWY’s revenues for the six months ended June 30, 2023 increased 4.8% year-over-year to €2.73 billion ($2.98 billion). Its adjusted net profit increased 1.9% year-over-year to €537 million ($586.15 million). Its adjusted EPS increased 6.4% year-over-year to €2.17.
Analysts expect WTKWY’s revenue for fiscal year ending December 31, 2023, to increase 5.3% year-over-year to $6.09 billion. Its EPS is expected to increase 6.3% year-over-year to $4.69 for the same year.
The stock has gained 12.1% over the past three months to close the last trading session at $141.55.
WTKWY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a B grade in Sentiment and Stability. It is ranked #18 out of 77 stocks in the Technology - Services industry.
Click here to see the other ratings of WTKWY (Value, Momentum, Growth, and Quality).
Teledyne Technologies Incorporated (TDY)
TDY provides enabling technologies for industrial growth markets in the United States, Canada, the United Kingdom, France, and internationally.
On November 21, 2023, TDY and global innovator of imaging solutions, announced Emerald Gen2, its new state-of-the-art CMOS image sensor family. Built on TDY e2v’s advanced imaging technologies, this new family delivers enhanced performance, making the new sensors ideal for a wide range of machine vision uses, outdoor surveillance, and traffic detection and monitoring cameras.
TDY’s trailing-12-month EBIT margin of 18.74% is 284% higher than the industry average of 4.88%, while its trailing-12-month levered FCF margin of 13.24% is 57.5% higher than the industry average of 8.41%.
TDY’s net sales for the fiscal third quarter ended October 1, 2023, rose 2.9% year-over-year to $1.40 billion. Net income attributable to TDY rose 11.4% year-over-year to $198.6 million. Its earnings per common share increased 11% year-over-year to $4.15.
Analysts expect TDY’s revenue for the fourth quarter ending December 31, 2023, to increase 2.8% year-over-year to $1.46 billion. Its EPS is expected to be $4.23 for the same quarter. Also, the company topped the consensus EPS estimates in each of the four trailing quarters, which is impressive.
Shares of TDY increased 9.1% over the past month to close the last trading session at $425.97.
TDY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Stability, Momentum, and Sentiment. Within the B-rated Technology - Electronics industry, it is ranked #10 out of 39 stocks.
Beyond what is stated above, we’ve also rated TDY for Growth, Value, and Quality. Get all TDY ratings here.
NetApp, Inc. (NTAP)
NTAP offers cloud-led and data-centric services to manage and share data on-premises and private and public clouds internationally. The company operates in two segments: Hybrid Cloud; and Public Cloud. It serves energy, financial services, technology, government, life science, media, healthcare service, entertainment, and animation markets.
On November 9, NTAP announced the renewal of its collaboration with Microsoft. NTAP delivers innovations to Microsoft Azure users that bring together solutions for cloud storage with Azure NetApp Files (ANF) NetApp BlueXP, and Cloud Volumes ONTAP and now CloudOps solutions from Spot by NetApp—all based on industry-leading NetApp and Microsoft technologies.
NTAP pays a $2 per share dividend annually, translating to a 2.25% yield on the prevailing share price. Its four-year average dividend yield is 3.03%. The company’s dividend payouts have grown at a CAGR of 10.8% over the past five years.
NTAP’s trailing-12-month gross profit margin and net income margin of 68.55% and 11.34% are 40.83% and 416.7% higher than the respective industry averages of 48.67% and 2.20%.
NTAP reported net revenues of $1.56 billion for the fiscal 2024 second quarter that ended October 27, 2023. Its non-GAAP net income was $334 million, or $1.10 per share, respectively. The company’s net cash provided by operating activities came in at $135 million.
Street expects NTAP’s EPS for the fiscal year (ending April 2024) to increase 9.8% year-over-year to $6.14. The company’s EPS and revenue are expected to grow 4.6% and 3.9% from the previous year to $6.41 and $6.47 billion for the fiscal year 2025. Moreover, it has surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past month, the stock has surged 15.7% to close the last trading session at $89.70.
It’s no surprise that NTAP has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has an A grade for Quality and a B in Momentum and Growth. Within the A-rated Technology - Hardware industry, it is ranked #10 out of 36 stocks.
In addition to the POWR Ratings stated above, one can access NTAP's ratings for Sentiment, Value, and Stability here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
WTKWY shares were trading at $142.42 per share on Tuesday morning, up $0.87 (+0.61%). Year-to-date, WTKWY has gained 39.18%, versus a 25.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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