The demand for technology-related products and services will remain strong despite macroeconomic concerns. A solid industry with solid prospects for the long term may also make it worthwhile to buy the fundamentally sound tech shares Concentrix (CNXC), Indra sistemas (ISMAY) and ON24(ONTF). Continue reading.
While macroeconomic uncertainty may hinder near-term growth in the tech industry, long-term prospects remain positive due to government spending and the digital transformation of industries.
Concentrix Corporation, Indra Sistemas, S.A., and ON24, Inc., all quality tech stocks, could be well worth investing in.
Gartner, Inc., predicts that global government IT service spending will reach $209.10 Billion in 2023, up 8.9% from 2022.
North America's IT Services Market is expected to grow by 5.8% CAGR, reaching $861.69 Billion in 2032. The IT revolution changed businesses, increasing their operational efficiency and allowing them to focus on what they do best.
The North American IT services market is expected to grow due to the adoption of online payments, the introduction of advanced technologies like AI and Blockchain in the financial, insurance, and banking industries, and the increasing number of eWallets.
The market for digital transformation will also grow at 21% CAGR, reaching $2.74 trillion in 2030. This growth is fueled by the changing expectations of customers, competition pressures, evolving business models, operational efficiency and sustainability.
The Technology Select Sector ETF (XLK), which has returned 19% over the last three months, is a good indicator of investor interest in tech stocks.
We will examine the fundamentals behind the stocks we have selected.
CNXC provides solutions and technologies for Customer Experience (CX). It optimizes CX and offers innovative tech, automation and analytics. The company also offers integrated solutions that support the customer lifecycle including CX/UX design, strategy, and insights.
CNXC’s forward EV/Sales multiplication of 1.01, is 40.2% less than the industry standard of 1.68. The company's non-GAAP forward P/E multiple is 6.95, which is 59.3% less than the industry standard of 17.09.
CNXC’s levered FCF Margin of 8.47% for the trailing 12 months is 62.6% greater than the industry average, which is 5.21%. Its trailing-12 month gross profit margin is 20 percent higher than the average industry of 29.83%.
CNXC increased its revenue by 6.5% over the previous year, to $1.64 Billion in the first quarter of fiscal 2019, which ended on February 28. The company's non-GAAP Operating Income increased by 7.8% over the past year to $217.60 millions. The company's adjusted EBITDA grew 7.5% to $255.80 millions from the previous year.
The revenue estimate consensus of $6.77 Billion for the year ending in November 2023 represents an increase of 7.1% year-over-year. The EPS for the same time period is expected to increase marginally. CNXC shares lost a small amount intraday, closing the last session at $81.50.
CNXC’s POWR ratings reflect this positive outlook. The stock is rated B overall, which is equivalent to a Buy rating in our proprietary system. The POWR ratings assess stocks based on 118 factors, each of which has its own weighting.
CNXC is rated B- for value. It is ranked 18th out of 81 stocks in the Technology-Services industry. Click here to view the POWR ratings for CNXC for Stability and Growth, Sentiment and Quality, Momentum or Growth, and Sentiment.
Indra Sistemas, S.A. (ISMAY)
ISMAY is a technology company based in Alcobendas (Spain). ISMAY provides consulting services worldwide. It designs, develops and produces systems, solutions and services that are based on information technology, computing, electronics and communications.
ISMAY’s forward EV/Sales Multiple of 0.51 is 82.66% lower than industry average 2.95. The company's price/book multiple is 0.50, which is 82.1% less than the industry standard of 4.81.
ISMAY’s ROCE for the trailing-12 months of 18.40% exceeds the industry average by a significant margin of 0.50%. Its ROTA for the trailing 12 months is 3.85%, which is much higher than industry average of 0.02 %.
ISMAY increased its revenues by 7.8% to EUR917.8 million (USD994.83million) during the first quarter of fiscal 2023. Its net profit also increased by 12.8% to EUR44million ($47.73million) while its EPS increased by 13.6% to EUR0.25.
Analysts predict that ISMAY will increase its revenue by 6.6% to $4.34billion for the fiscal year ending in December 2023. The stock closed the last trading day at $5.95, up 52.6% in the past nine-month period.
ISMAY’s POWR ratings reflect its strong outlook. The stock is rated B overall, which in our rating system translates into a Buy.
It is ranked #19. It is rated B for Value and Stability. Click here to see ISMAY's additional ratings for Sentiment and Momentum.
ONTF is a cloud-based platform for digital engagement that allows businesses to turn customer engagement into revenue by delivering interactive webinars, virtual events, and multimedia experiences around the world.
ONTF's EV/Sales forward multiple of 0.39, is 86.9% less than the average industry of 2.95. Its price/sales multiple is 2.29, which is 18.4% less than the average industry value of 2.81.
ONTF's levered FCF Margin of 10.48% for the trailing 12 months is 49.4% greater than the industry-average of 7.01%. Its gross profit margin for the trailing 12 months of 72.06% was 46.4% greater than the industry's average of 49.24%.
ONTF's operating expenses in the first quarter of 2023 decreased slightly year-over-year, to $49.79 millions. The current liabilities of the ONTF were $105.56 for the quarter that ended March 31 2023. This compares to $110.73 for the same period in 2022.
Its total liabilities were $111.47 millions, down from $117.51 in the same time period.
Street estimates ONTF's earnings per share to be $0.07 by the end of December 2024. In the last three months, ONTF's stock price has risen 20.6% and closed the last trading day at $8.16.
ONTF is rated B overall, which equates to a Buy rating in our POWR ratings system. It is rated B for Value. It is ranked #20 within the same industry.
In addition to the above ratings, we have also given ONTF ratings for Growth, Stability Sentiment Quality and Momentum. All ONTF ratings are available here.
CNXC's shares were unchanged during premarket trading on Friday. CNXC shares have declined -38.50% year-to-date compared to a rise of 15.00% in the benchmark S&P 500 Index during the same time period.
Rashmi K. Kumari
Rashmi's passion for capital markets, financial regulation, and wealth management led her to pursue an investment analyst career. She has a master's in commerce and aims to help individual investors understand complex financial issues.