The tech industry is one of today’s most dynamic and rapidly growing industries. With breakthrough innovations, it’s no surprise that tech stocks have gained traction among investors. So, if you’re looking for high-growth opportunities, consider investing in these three fundamentally sound tech stocks Canon Inc. (CAJPY), Iteris, Inc. (ITI), and Quantum Corporation (QMCO) today and potentially reap substantial returns tomorrow.
Despite the volatile nature of the market, the tech industry has made an impressive turnaround in the first half of the year. The technology sector’s performance is evident by the tech-heavy Nasdaq Composite index’s 34.1% year-to-date gains.
As technology advances and becomes more integrated into our daily lives, the demand for tech products and services will only increase. Underscoring tech demand, Gartner, Inc. (IT) forecasted global IT spending to increase 5.5% year-over-year to reach $4.64 trillion in 2023. Moreover, for 2024, spending is projected to rise 8.6% year-over-year, with 11% growth expected in the devices segment.
The IT sector has witnessed remarkable growth in recent years, thanks to the rise of digital technologies. This has made the IT hardware industry a pivotal contributor to this growth. According to industry forecasts, the global IT Hardware market is expected to register a CAGR of 6.1% throughout 2027.
With the tech hardware industry rapidly changing, there are several new trends to keep an eye on. These include the rise of the Internet of Things (IoT), the explosion in interest in Artificial Intelligence (AI), the growth of cloud computing, and the growing popularity of wearable devices. The wearable technology market is expected to grow at a CAGR of 18%, reaching $265.40 billion by 2026.
Given this backdrop, let’s probe into the fundamentals of CAJPY, ITI, and QMCO that look well-positioned to benefit from the industry tailwinds.
Canon Inc. (CAJPY)
Headquartered in Tokyo, Japan, CAJPY manufactures and sells office multifunction devices, laser and inkjet printers, cameras, medical equipment, and lithography equipment. It operates through four segments: Printing Business Unit; Imaging Business Unit; Medical Business Unit; and Industrial and Others Business Unit.
On June 29, the company announced the achievement of two major production milestones with the production of 110 million1 EOS series cameras and 160 million2 RF/EF series interchangeable lenses. CAJPY plans to continue refining its proprietary imaging technologies and expanding its product lineup to meet diverse customer needs and contribute to advancing photographic and video imaging culture.
On May 29, CAJPY announced that it had developed a quantum-dot ink with a perovskite structure (perovskite quantum-dot ink) for use in next-generation quantum-dot displays, with improved durability and potential for application in high-image-quality displays.
As displays with quantum-dot technology are gaining popularity due to their wide color gamut, allowing high visual expressiveness and their potential to achieve higher color purity and light utilization efficiency. This development could attract robust demand and help stay competitive in the market.
In terms of the trailing-12-month EBIT margin, CAJPY’s 9.33% is 124.5% higher than the 4.16% industry average. Also, its 6.17% trailing-12-month net income margin is 260.3% higher than the industry average of 1.71%.
CAJPY’s net sales for the fiscal first quarter that ended March 31, 2023, increased 10.4% year-over-year to ¥971.12 billion ($6.98 billion). The company’s operating profit grew 10.9% from the year-ago value to ¥84.47 billion ($607.37 million), while net income attributable to CAJPY increased 22.7% year-over-year to ¥56.41 billion ($405.58 million). In addition, its net income per share came in at ¥55.53, up 26.3% year-over-year.
The consensus revenue estimate of $7.28 billion for the third quarter (ending September 2023) represents a 6.9% increase from the prior year. It is expected to reach $30.27 billion in the fiscal year 2023, reflecting a 127% improvement year-over-year.
The stock has gained 23.2% year-to-date to close the last trading session at $26.71.
CAJPY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Quality and a B for Value. In the 43-stock Technology - Hardware industry, it is ranked #3. Click here to see the other ratings of CAJPY for Growth, Momentum, Stability, and Sentiment.
Iteris, Inc. (ITI)
ITI provides smart mobility infrastructure management solutions to public and private sector customers primarily located in North America. These solutions include traveler information systems, transportation performance measurement software, traffic analytics software, transportation operations software, and mobility consulting services.
On July 11, Los Angeles County Metropolitan Transportation Authority (LA Metro) awarded the company a $1.3 million SaaS contract for the continued use of ClearGuide. This technology will provide transportation analytics to support mobility and safety applications throughout the county. The three-year agreement demonstrates the agency’s continued confidence in ClearGuide and ITI’s services.
The stock’s trailing 12-month asset turnover ratio of 1.32x is 117.9% higher than the industry average of 0.61x.
In the fourth quarter that ended March 31, 2023, ITI’s total revenues increased 23.9% year-over-year to $42.44 million. Its gross profit grew 21.8% from the year-ago value to $13.49 million. The company’s adjusted EBITDA came in at $1.41 million compared to an adjusted EBITDA loss of $1.05 million in the prior-year quarter.
Also, its net cash flow of $6.2 million reflects earnings improvement and strong working capital management, resulting in an ending cash balance of $16.60 million as of March 31, 2023.
Street expects ITI’s revenue for the first quarter (ended June 30, 2023) to increase 13.8% year-over-year to $38.33 million. Its EPS for the to-be-reported quarter is expected to be $0.03. Moreover, the company surpassed the revenue estimates in three of the trailing four quarters, which is impressive.
Over the past nine months, the stock has gained 51.3% to close the last trading session at $3.95.
It is no surprise that ITI has an overall rating of B, which translates to Buy in our proprietary rating system. It also has a B grade for Growth. In addition, within the same industry, it is ranked #10
Beyond what is stated above, we have also given ITI grades for Value, Momentum, Stability, Sentiment, and Quality. Get all ITI ratings here.
Quantum Corporation (QMCO)
QMCO delivers end-to-end solutions to analyze, enrich, store, manage, protect, and preserve unstructured data across its entire lifecycle. The company specializes in solutions for video data, images, and other large files. Its portfolio of products includes primary storage software and systems, secondary storage software and systems, as well as devices and media.
On June 28, QMCO announced that its comprehensive enterprise backup storage portfolio qualified with the new Veeam® Data Platform, providing multi-layered data protection, strengthened cybersecurity, rapid recovery, immutability, and offline protection against ransomware.
By integrating its enterprise backup and data protection portfolio with the latest Veeam Data Platform, the company provides customers with the most choice and security for backing up and protecting data. This could help QMCO expand its customer base, increase revenue, and establish itself as a reliable and secure provider of data protection and backup solutions.
On May 3, the company’s all-flash file and object storage software solutions, Quantum Myriad, bagged three industry awards at the 2023 NAB Show: TV Tech Best of Show, TVBEurope Best of Show, and the NAB Product of the Year in the Cloud Computing and Storage Category. These awards highlight QMCO’s dedication to innovation and delivering modern end-to-end solutions to solve unstructured data challenges.
During the fourth quarter (ended March 31, 2023), QMCO’s total revenue increased 10.6% year-over-year to $105.34 million. Its total operating expenses declined marginally from the year-ago value to $41.31 million. The company’s adjusted EBITDA improved by 145.2% from the prior-year quarter to $1.04 million.
The stock’s trailing 12-month CAPEX/Sales of 3.05% is 31.4% higher than the industry average of 2.32%. Additionally, its trailing-12-month asset turnover ratio of 1.99x compares to the industry average of 0.61x.
QMCO’s revenue for the second quarter (ending September 2023) is expected to increase marginally year-ago value to $99.53 million. It is expected to register a 2.9% year-over-year growth, reaching $424.63 million in the fiscal year 2024. In addition, it topped the consensus revenue estimates in each of the trailing four quarters.
Shares of QMCO have gained 12% over the past three months to close the last trading session at $1.12.
QMCO’s POWR Ratings reflect this promising outlook. It has an overall rating of B, translating to Buy in our proprietary rating system.
It also has a B grade for Value, Sentiment, and Quality. It is ranked #8 out of 43 stocks in the same industry. Click here to see the additional ratings of QMCO (Growth, Momentum, and Stability).
What To Do Next?
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CAJPY shares were trading at $26.76 per share on Thursday afternoon, up $0.05 (+0.19%). Year-to-date, CAJPY has gained 23.43%, versus a 18.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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