The past year has been challenging for the technology sector amid geopolitical headwinds, high inflation, and aggressive interest rates putting pressure on consumer spending and revenue growth. However, the industry should witness robust growth in the long run, fuelled by innovation and digital transformations.
Therefore, investors could consider buying fundamentally strong tech hardware stocks Dell Technologies Inc. (DELL), AstroNova, Inc. (ALOT), and TransAct Technologies Incorporated (TACT).
Despite macroeconomic turbulence, worldwide IT spending is projected to reach $4.6 trillion in 2023, an increase of 5.5% from the last year, according to the latest forecast by Gartner, Inc.
Additionally, the technology hardware sector will likely witness continued growth, thanks to the constant innovation and evolution of products and infrastructure.
Furthermore, it is powered by the growth of the semiconductor industry. The global semiconductor market is projected to reach $1.38 trillion by 2029 at a CAGR of 12.2%.
Consequently, the global hardware market is expected to grow at a CAGR of 7.9% to $164.21 billion by 2027. Moreover, investors’ interest in technology stocks is evident from the Vanguard Information Technology Index Fund’s (VGT) 32.1% returns year-to-date.
Given these factors, investing in the featured stocks could be prudent. Let’s have a closer look at their fundamentals.
Dell Technologies Inc. (DELL)
DELL designs, develops, manufactures, markets, sells, and supports various comprehensive and integrated solutions, products, and services worldwide. The company operates through two segments, Infrastructure Solutions Group (ISG) and Client Solutions Group (CSG).
In terms of the trailing-12-month asset turnover ratio, DELL’s 1.13x is 85.6% higher than the 0.61x industry average. Likewise, its 12.91% trailing-12-month Return on Total Capital is 675.5% higher than the industry average of 1.66%. Furthermore, the stock’s 5.45% trailing-12-month EBIT margin is 25.2% higher than the industry average of 4.35%.
On May 22, 2023, DELL unveiled new Dell APEX offerings across cloud platforms, public cloud storage software, client devices, and computing. These additions to the industry’s portfolio are anticipated to help businesses operate and innovate faster through improved management and mobility of their applications and data wherever they reside.
DELL’s non-GAAP operating income for the fiscal first quarter ended May 5, 2023, came in at $1.60 billion. The company’s non-GAAP net income came in at $963 million. Additionally, its non-GAAP EPS came in at $1.31.
DELL’s EPS and revenue for fiscal 2025 are expected to increase 10.4% and 4.8% year-over-year to $6.13 and $91.16 billion, respectively. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. The stock has gained 25.6% over the past nine months to close the last trading session at $46.85.
DELL’s strong outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #9 out of 44 stocks in the Technology - Hardware industry. In addition, it has a B grade for Value and Sentiment.
Click here to see the additional ratings of DELL for Growth, 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).
In terms of the trailing-12-month Return on Common Equity, ALOT’s 3.22% is 538.6% higher than the 0.50% industry average. Its 3.72% trailing-12-month Return on Total Capital is 123.4% higher than the 1.66% industry average. Likewise, its 1.12x trailing-12-month asset turnover ratio is 84.8% higher than the industry average of 0.61x.
For the fourth quarter ended January 31, 2023, ALOT’s revenue increased 34.2% year-over-year to $39.85 million. The company’s non-GAAP gross profit increased 39.1% from the prior-year period to $13.56 million.
Its non-GAAP operating income increased 1023.8% year-over-year to $2.09 million. Also, its net EPS came in at $0.18, representing a 155.6% increase over the past year.
Over the past six months, the stock has gained 39.5% to close the last trading session at $15.72.
ALOT’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It is ranked #1 out of 44 stocks in the same industry. It has an A grade for Growth and a B for Value, Stability, and Sentiment.
Click here to see the additional ratings of ALOT for Momentum 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.
In terms of the trailing-12-month Return on Common Equity, TACT’s 4.29% is 751.3% higher than the 0.50% industry average. Its 2.74% trailing-12-month Return on Total Capital is 64.9% higher than the 1.66% industry average. Likewise, its 1.44x trailing-12-month asset turnover ratio is 137.1% higher than the industry average of 0.61x.
TACT’s non-GAAP net income for the first quarter ended March 31, 2023, came in at $3.14 million, compared to its non-GAAP net loss of $4.35 million for the prior-year quarter.
The company’s adjusted EBITDA came in at $4.46 million, compared to its adjusted EBITDA loss of $5.12 million in the year-ago quarter. Additionally, its net EPS increased 241.9% year-over-year to $0.31.
TACT’s revenue for the quarter ending June 30, 2023, are expected to increase 46.3% year-over-year to $18.47 million. Over the past year, the stock has gained 66% year-to-date to close the last trading session at $7.49.
It is no surprise that TACT has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It is ranked #5 in the Technology - Hardware industry. The stock has an A grade for Sentiment and a B for Growth and Value.
Click here to see the additional ratings of TACT for Momentum, Stability, and Quality.
What To Do Next?
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DELL shares were unchanged in premarket trading Wednesday. Year-to-date, DELL has gained 18.45%, versus a 12.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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