The technology industry has the potential to grow significantly due to the rising digitalization across various industries and the wide integration of cutting-edge technologies. Given the industry’s solid growth prospects, investors could consider buying fundamentally sound tech stocks such as EchoStar Corporation (SATS), M-tron Industries, Inc. (MPTI) and Bel Fuse Inc. (BELFB) for solid returns.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the tech industry.
According to Statista, the electronics market in the U.S. is expected to generate $131.40 billion in revenue in 2023. Revenue is estimated to expand at a 4.8% CAGR, resulting in a market volume of $158.60 billion by 2027.
The rising demand for consumer electronics like laptops, smartphones, and smart home appliances drives growth. The introduction of innovative products and technological improvements are also boosting the market.
Moreover, the digital transformation market is expected to increase at a CAGR of 24.1% to $3.14 trillion by 2030. The growing digitization trend, as well as the increasing requirement for effective resource utilization, are likely to fuel market expansion.
In addition, the global IT market is expected to grow at a 7.9% CAGR until 2027. Moreover, investors’ interest in tech stocks is evident from the iShares Expanded Tech Sector ETF’s (IGM) 11.6% returns over the past six months.
In light of these encouraging trends, let’s look at the fundamentals of the three top-rated Technology - Electronics stocks, beginning with number 3.
Stock #3: EchoStar Corporation (SATS)
SATS offers global networking solutions. Its Hughes segment provides broadband tech, hardware, and satellite solutions to government and enterprise clients, whereas its EchoStar Satellite Services arm offers owned/leased satellites on a full-time/occasional basis to U.S. government, ISPs, news, content, and private sector customers.
SATS’ forward EV/Sales of 0.53x is 69% lower than the industry average of 1.70x. Its forward Price/Sales of 0.62x is 40.1% lower than the industry average of 1.04x.
SATS’ trailing-12-month net income margin of 5.92% is 67.5% higher than the industry average of 3.54%. Its trailing-12-month CAPEX / Sales of 13.89% is 239.8% higher than the 4.09% industry average.
For the second quarter that ended June 30, 2023, SATS’ revenue from EchoStar Satellite Services increased 26.2% year-over-year to $6.12 million. Its income before income taxes grew 75.6% from the year-ago value to $27.86 million.
In addition, as of June 30, 2023, the company’s current assets stood at $2.40 billion, compared to $2.13 billion as of December 31, 2022. Moreover, cash, cash equivalents, and current marketable investment securities were $1.9 billion as of June 30, 2023, up from $1.7 billion as of March 31, 2023.
Analysts expect SATS’ revenue for the fiscal year ending December 2024 to increase 6% year-over-year to $1.94 billion. Its EPS is expected to come in at $0.65 for the same period. It surpassed EPS estimates in three of four trailing quarters. Shares of SATS has gained marginally intraday to close the last trading session at $13.75.
SATS’ 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.
SATS also has a B grade for Value and Quality. It is ranked #9 out of 42 stocks in the Technology - Electronics industry. Click here for the additional POWR Ratings for Growth, Stability, Sentiment, and Momentum for SATS.
Stock #2: M-tron Industries, Inc. (MPTI)
MPTI together with its subsidiaries, engages in the design, manufacture, and marketing of frequency and spectrum control products.
MPTI’s forward EV/Sales of 1.90x is 21.1% lower than the industry average of 2.41x. Its forward EV/EBIT of 16.30x is 3.6% lower than the industry average of 16.91x.
MPTI’s trailing-12-month ROCE of 14.68% is significantly higher than the industry average of 1.01%. Its trailing-12-month ROTA of 12.07% is significantly higher than the industry average of 0.02%.
MPTI’s revenues for the fiscal second quarter (ended June 30, 2023) increased 43.5% year-over-year to $10.14 million, while its adjusted EBITDA increased 129.6% year-over-year to $1.93 million. Also, the company’s net income and EPS increased 162.8% and 161.1% year-over-year to $1.28 million and $0.47, respectively.
Street expects MPTI’s revenue to increase 26.6% year-over-year to $40.30 million for the year ending December 2023. Its EPS is expected to grow at 55.3% year-over-year to $1.17 for the same period. Over past year the stock has gained 168.7% to close the last trading session at $28.56.
MPTI’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 #7 in the same industry. It has an A grade for Sentiment and a B for Quality. To see additional MPTI’s ratings for Value, Growth, Stability, and Momentum, click here.
Stock #1: Bel Fuse Inc. (BELFB)
BELFB designs, manufactures, and markets circuit safeguarding and interconnection products. Its magnetic solutions include integrated connector modules, power transformers, SMD power inductors, SMPS transformers, and discrete ethernet components.
BELFB’s forward non-GAAP P/E of 6.74x is 66.9% lower than the industry average of 20.36x. Its forward EV/EBIT of 6.29x is 62.8% lower than the industry average of 16.91x.
BELFB’s trailing-12-month ROCE of 27.50% is significantly higher than the industry average of 1.01%. Its trailing-12-month ROTA of 13.20% is significantly higher than the industry average of 0.02%.
During the third quarter that ended September 30, 2023, BELFB’s gross profit grew 7.6% year-over-year to $55.47 million. Its adjusted EBITDA rose 9.5% from the year-ago value to $29.88 million. Also, the company’s non-GAAP net earnings and class A EPS increased 16.1% and 13.6% year-over-year to $21.24 million and $1.59, respectively.
The consensus revenue estimate of $652.40 million for the year ending December 2024 represents a marginally increase year-over-year. Its EPS is expected to come in at $6.25 for the same period. It surpassed EPS estimates in all four trailing quarters. BELFB’s shares have gained 59.9% over the past six months to close the last trading session at $48.98.
It’s no surprise that BELFB has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Value and Sentiment and a B for Quality. It is ranked first in the #4 industry.
Beyond what is stated above, we’ve also rated BELFB for Momentum, Growth and Stability. Get all BELFB ratings here.
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SATS shares were trading at $13.50 per share on Friday afternoon, down $0.25 (-1.82%). Year-to-date, SATS has declined -19.06%, versus a 9.12% 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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