The tech-heavy Nasdaq Composite declined 0.5% over the last four trading days on investors’ concerns about strong inflationary pressures. However, strong corporate earnings reported by the tech companies rekindled investor interest in the technology industry. This is evidenced by the Technology Select Sector SPDR Fund’s (XLK) 17.4% returns over the past three months.
Furthermore, rapid digitalization is increasing the demand for advanced technology solutions. And the continued deployment of 5G is expected to boost the industry's growth. The resurgence of COVID-19 cases has also made the backdrop favorable for the technology industry because it suggests a prolonging of remote activities adopted during the worst of the pandemic. .
But because investors expect a market correction in the near term, several overpriced tech stocks could suffer a decline. So, we think it could be wise to bet on affordably priced tech stocks. Absolute Software Corporation (ABST) and AstroNova Inc. (ALOT), which are currently trading below $20. fit the bill because they possess sufficient fundamental strength to create significant value for investors in the coming months.
Absolute Software Corporation (ABST)
Vancouver, Canada-based ABST creates, promotes, and offers a cloud-based endpoint visibility and control platform for business and public sector companies to manage and secure computing devices, apps, and data. The company's Absolute platform provides data and devices connection, visibility, and operating system control.
Last month, ABST completed the purchase of 100% of NetMotion Software, a premier connectivity and security solutions supplier, from The Carlyle Group. The acquisition should help ABST expand its product portfolio and strengthen its competitive position.
During its fiscal year ended June 30, 2021, ABST’s total revenue increased 15.4% year-over-year to $120.8 million. Its adjusted EBITDA surged 16.4% from the prior-year quarter to $31.9 million, while its cash from operating activities increased 87.2% year-over-year to $46.8 million over this period.
Analysts expect ABST's revenue to increase 69.8% year-over-year to $205.09 million in the current year. Its EPS is expected to increase 85.7% in its fiscal year 2022. The stock has gained 14.1% over the past nine months to close yesterday’s trading session at $11.86.
ABST's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
ABC also has an A grade for Quality, and a B for Stability and Value. In addition, y, within the Software – Application industry, it is ranked #14 of 144 stocks.
To see additional POWR Ratings for Growth, Momentum, and Sentiment for ABST, click here.
Click here to check out our Software Industry Report for 2021
AstroNova Inc. (ALOT)
ALOT designs, develops, manufactures, and distributes specialty printers and data acquisition and analysis systems in the United States, Europe, Asia, Canada, Central and South America, and internationally. Product Identification (PI); and Test & Measurement (T&M) are the two operational segments of the West Warwick, R.I.-based company.
Last month, Airbus qualified ALOT as a Tier 1 supplier for the A320 Family of commercial aircraft. This will enable ALOT to provide its flight deck printers directly to Airbus rather than through a third party and strengthen its brand image.
In June, the Chinese Civil Aviation Administration certified ALOT's West Warwick, R.I repair station to provide maintenance, repair, and overhaul services on flight deck printers and related components for clients with Chinese-registered aircraft. This accreditation could enhance the company’s position in the worldwide commercial aerospace MRO market.
During its first fiscal quarter, ended May 1, 2021, ALOT’s net income increased 37.3% year-over-year to $593,000, while its EPS grew 33.4% to $0.08 over the period. The company’s operating expenses declined marginally year-over-year to $10.15 million. Furthermore, its revenue from its product identification segment increased 3.1% year-over-year to $23.1 million.
ALOT is expected to achieve 5.5% revenue growth for the current year. In addition, its EPS is estimated to increase 122.2% year-over-year to $0.4 in 2022. Over the past year, ALOT's stock has gained 106.1% to close yesterday’s trading session at $15.95.
ALOT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Value and Sentiment, and a B for Momentum and Quality. In the B-rated Technology – Electronics industry, it is ranked #1 of 49 stocks.
In total, we rate ALOT on eight different levels. Beyond what we've stated above, we have also given ALOT grades for Stability and Growth. Get all the ALOT ratings here.
ABST shares were trading at $11.74 per share on Friday afternoon, down $0.12 (-1.01%). Year-to-date, ABST has declined -0.58%, versus a 19.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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