Despite macroeconomic concerns, demand for technology products and services will likely remain steady. So, quality tech stocks Cisco Systems, Inc. (CSCO), ClearOne, Inc. (CLRO), and Cambium Networks Corporation (CMBM) could be wise additions to your portfolio.
The IT revolution has altered businesses by increasing operational efficiency and allowing businesses to focus on their strengths. The North America IT Services market is anticipated to grow at a 5.8% CAGR to $861.69 billion by 2032.
The wireless data communication market is expected to reach $4.88 billion by 2029, growing at a CAGR of 17.8%. The telecommunications industry is rapidly evolving, with 4G technology driving growth in the global wireless data communication market.
In addition, 5G technology is projected to revolutionize the market by increasing mobile broadband capacity and density. This expansion is projected to improve rural and isolated economic circumstances, boost new businesses, and improve the consumer experience.
Investors’ interest in tech stocks is evident from the Technology Select Sector SPDR ETF’s (XLK) 47.1% returns over the past nine months.
Take a detailed look at the stocks mentioned above:
Cisco Systems, Inc. (CSCO)
CSCO is engaged in designing, manufacturing, and selling Internet Protocol-based networking and other products related to the communications and information technology industry. The company offers wireless products, routed optical networking, 5G, silicon, optics solutions, etc.
On June 7, 2023, CSCO and AT&T (T) unveiled new hybrid workforce solutions to improve connection and develop the calling environment. The modern workforce is not bound to a particular area, device, or territory, whether on the shop floor, the top floor, the branch office, the home office, or the journey in between.
CSCO’s forward EV/EBITDA of 9.64x is 34.5% lower than the industry average of 14.72x. Its forward EV/EBIT of 10.54x is 42.8% lower than the industry average of 18.43x.
CSCO’s trailing-12-month ROCE of 27.74% is significantly higher than the industry average of 0.23%. Its trailing-12-month net income margin of 20.89% is significantly higher than the industry average of 1.71%.
CSCO’s total revenue increased 13.5% year-over-year to $14.57 billion in the third quarter that ended April 29, 2023. The company’s gross margin rose 13.7% from the year-ago value to $9.23 billion, while its non-GAAP net income increased 13.9% from the prior-year quarter to $4.10 billion. Also, its non-GAAP EPS stood at $1 per share, up 15% year-over-year.
The consensus revenue estimate of $56.80 billion for the year ending July 2023 represents a 10.2% increase year-over-year. Its EPS is expected to grow 13.3% year-over-year to $3.81 for the same period. It surpassed EPS estimates in all four trailing quarters. CSCO’s shares have gained 31.7% over the past nine months to close the last trading session at $52.12.
CSCO’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.
CSCO has an A grade for Quality and a B grade for Stability. It is ranked #7 out of 52 stocks in the Technology - Communication/Networking industry. Click here for the additional POWR Ratings for Growth, Sentiment, Momentum, and Value for CSCO.
ClearOne, Inc. (CLRO)
CLRO, together with its subsidiaries, designs, develops and sells conferencing, collaboration, and network streaming solutions for voice and visual communications in the United States and internationally.
CLRO’s trailing-12-month Price/Book of 0.26x is 91.8% lower than the industry average of 3.13x. Its trailing-12-month Price/Sales of 0.86x is 70.4% lower than the industry average of 2.92x.
CLRO’s trailing-12-month ROCE of 34.74% is significantly higher than the industry average of 0.23%. Its trailing-12-month net income margin of 99.33% is significantly higher than the industry average of 1.71%.
CLRO’s total current liabilities came in at $5.90 billion for the period that ended March 31, 2023, compared to $8.12 billion for the period that ended December 31, 2022. Its total liabilities and stockholders’ equity came in at $7.86 billion, compared to $9.62 billion for the same period.
Over the past nine months, the stock has gained 148.3% to close the last trading session at $0.79.
It’s no surprise that CLRO has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Value and a B for Quality. It is ranked #13 in the same industry.
Beyond what is stated above, we’ve also rated CLRO for Growth, Sentiment, Stability, and Momentum. Get all CLRO ratings here.
Cambium Networks Corporation (CMBM)
CMBM designs, develops, and manufactures wireless broadband and Wi-Fi networking infrastructure solutions. The company offers point-to-point fixed wireless backhaul and point-to-multipoint fixed wireless solutions, and enterprise solutions.
CMBM’s forward EV/Sales of 1.23x is 59.4% lower than the industry average of 3.02x. Its forward Price/Sales of 1.25x is 57.4% lower than the industry average of 2.93x.
CMBM’s trailing-12-month ROCE of 19.66% is significantly higher than the industry average of 0.23%. Its trailing-12-month net income margin of 8.34% is 386.8% higher than the industry average of 1.71%.
CMBM’s revenues for the first quarter ended March 31, 2023, increased 25.1% year-over-year to $77.40 million. The adjusted EBITDA increased 435.7% year-over-year to $10.38 million. Its non-GAAP net income increased significantly year-over-year to $6.81 million. Moreover, its non-GAAP EPS came in at $0.24, representing a considerable increase over the prior-year quarter.
Analysts expect CMBM’s revenue to increase 12% year-over-year to $332.61 million for the year ending December 2023. Its EPS is expected to grow 28.8% year-over-year to $1.21 for the same period. It surpassed EPS estimates in all four trailing quarters. CMBM’s shares have gained marginally intraday to close the last trading session at $15.15.
CMBM’s strong 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 #8 in the same industry. It has a B grade for Growth and Sentiment. To see additional CMBM ratings for Momentum, Stability, Value, and Quality, click here.
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CSCO shares were trading at $51.58 per share on Wednesday morning, down $0.54 (-1.04%). Year-to-date, CSCO has gained 10.79%, versus a 17.68% 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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