Technology plays a vital role in enhancing productivity, innovation, and efficiency in the economy, driving economic growth. The integration of advanced tech such as AI, cloud services, and IoT across industries like auto, medical, and finance, along with increased access to consumer tech, creates expanding opportunities and boosts market performance.
Also, investments in the tech sector are promising due to its role in digital transformation and addressing modern challenges, making it a potentially lucrative sector now. Investors might consider buying strong tech stocks like Leidos Holdings, Inc. (LDOS), Flex Ltd. (FLEX), and TTM Technologies, Inc. (TTMI), which have recently shown strong momentum and are likely to keep rising.
Globally, enterprises are embracing digital transformation with a focus on AI and sustainable technology. In particular, generative AI, robotics, and immersive reality are attracting substantial interest and investment, leading to a positive long-term outlook. Gartner predicts that global IT spending will reach $5.26 trillion in 2024, an increase of 7.5% from 2023, with IT services growing by 7.1% to $1.61 trillion.
Despite past challenges such as supply chain issues and inflation, the electronics market is poised to rebound in the latter half of 2024. This recovery is driven by strong demand for smart home tech, wearables, and productivity solutions, reflecting today's tech-focused lifestyle and evolving needs. The electronics market is expected to reach $94.93 billion in 2024 and grow to $116.60 billion by 2029, with a 4.20% CAGR.
Considering these conducive trends, let’s assess the fundamentals of the three above-mentioned technology stocks.
Leidos Holdings, Inc. (LDOS)
LDOS provides services and solutions in the defense, intelligence, civil, and health markets in the U.S. and internationally. The company operates through Defense Solutions, Civil, and Health segments.
On July 29, 2024, LDOS announced it received an $823 million task order from DISA to operate and sustain the modernized DoDNet. This five-year contract will expand support to over 160,000 users and enhance network services with improved IT solutions.
On July 11, 2024, LDOS was awarded a $476 million contract by NASA to provide cargo mission engineering and integration services for the ISS Program and Artemis campaign. The contract, which spans two years, involves supporting NASA's space missions with analytical, engineering, and hardware development services.
In terms of the trailing-12-month asset turnover ratio, LDOS’ 1.23x is 58.3% higher than the 0.78x industry average. Likewise, the stock’s 10.09% trailing-12-month Return on Total Capital is 41.3% higher than the 7.14% industry average. LDOS’ 9.97% trailing-12-month EBIT margin is marginally higher than the 9.96% industry average.
LDOS’ revenues for the fiscal second quarter that ended June 28, 2024, increased 7.7% from the year-ago value to $4.13 billion. Similarly, its non-GAAP operating income rose 35.1% from the year-ago value to $524 million.
For the same quarter, its non-GAAP net income attributable to LDOS common stockholders stood at $358 million, up 43.8% over the prior-year quarter. Also, its non-GAAP EPS attributable to LDOS common stockholders grew 46.1% year-over-year to $2.63.
For the quarter ending September 30, 2024, LDOS’ revenue is expected to increase 3.6% year-over-year to $4.06 billion. Its EPS for the quarter ending December 31, 2024, is expected to rise 5.8% year-over-year to $2.10. LDOS surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 54.4% to close the last trading session at $144.40.
LDOS’ stock is trading above its 100-day and 200-day moving averages of $140.09 and $124.68, respectively.
LDOS’ positive outlook is reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth, Momentum, Stability, and Sentiment. Within the Technology – Services industry, it is ranked #2 out of 76 stocks. To access the additional POWR Ratings of LDOS for Value and Quality, click here.
Flex Ltd. (FLEX)
FLEX provides manufacturing solutions to various brands in Asia, the Americas, and Europe. It operates through two segments: Flex Agility Solutions (FAS) and Flex Reliability Solutions (FRS).
In terms of the trailing-12-month Return on Common Equity, FLEX’s 12.50% is 175.9% higher than the 4.53% industry average. Likewise, its 5.41% trailing-12-month Return on Total Assets is 162.4% higher than the 2.06% industry average. Also, its 3.71% trailing-12-month net income margin is 15.5% higher than the 3.21% industry average.
During the first quarter that ended on June 28, 2024, FLEX reported net revenue of $6.31 billion. The company’s non-GAAP operating income grew 4.4% year-over-year to $306 million. Moreover, its non-GAAP net income stood at $211 million, while its non-GAAP EPS rose 8.5% over the prior-year quarter to $0.51.
Street expects FLEX’s EPS and revenue for the quarter ending March 31, 2025, to increase 21.6% and 6.3% year-over-year to $0.69 and $6.56 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, FLEX’s stock has gained 71.9% to close the last trading session at $32.15.
FLEX’s stock is trading above its 10-day and 50-day moving averages of $30.74 and $31.14, respectively.
It’s no surprise that FLEX has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Value and Momentum. Within the Technology – Services industry, it is ranked #18. Beyond what we have stated above, we also have given FLEX grades for Growth, Stability, and Quality. Get all the FLEX ratings here.
TTM Technologies, Inc. (TTMI)
TTMI and its subsidiaries manufacture and sell mission systems, radio frequency (RF) components, RF microwave/microelectronic assemblies, and printed circuit boards (PCBs) worldwide. The company operates in two segments: PCB and RF&S Components.
On May 20, 2024, TTMI announced the launch of its Xinger 50W high-performance directional and hybrid couplers for X-Band military and aerospace applications. The new components, designed for medium power use, are available for sampling and will be purchasable later this summer.
In terms of the trailing-12-month EBIT margin, TTMI’s 5.83% is 14.3% higher than the 5.10% industry average. Its 12.30% trailing-12-month EBITDA margin is 20.9% higher than the 10.18% industry average. Similarly, the stock’s 3.31% trailing-12-month Return on Total Capital is 17.5% higher than the 2.82% industry average.
TTMI’s net sales for the fiscal second quarter that ended July 1, 2024, increased 10.7% year-over-year to $605.14 million. Its non-GAAP gross profit came in at $121.07 million, up 15.4% year-over-year. Additionally, the company’s adjusted net income and adjusted EPS rose 21.4% and 21.9% over the prior-year quarter to $40.13 million and $0.39, respectively.
For the quarter ending September 30, 2024, TTMI’s revenue is expected to grow 4.6% year-over-year to $598.98 million. Its EPS for the quarter ending March 31, 2025, is expected to increase 16.1% year-over-year to $0.36. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past nine months, TTMI’s stock has gained 68.7% to close the last trading session at $19.38.
TTMI’s stock is trading above its 100-day and 200-day moving averages of $17.54 and $16, respectively.
TTMI’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A grade for Growth and a B for Momentum and Sentiment. It is ranked #10 out of 43 stocks in the Technology - Electronics industry. To see TTMI’s Value, Stability, and Quality ratings, click here.
What To Do Next?
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LDOS shares were trading at $143.19 per share on Thursday afternoon, down $1.21 (-0.84%). Year-to-date, LDOS has gained 33.03%, versus a 14.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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