Given the promising growth potential of the technology sector, driven by the widespread integration of advanced technologies amid rapid digitalization across industries, it seems wise to scoop up shares of robust tech stocks Brother Industries, Ltd. (BRTHY), Bel Fuse Inc. (BELFB), and Eltek Ltd. (ELTK) to capitalize on potential profits.
Before delving into the highlighted stocks, let's explore the driving forces behind the tech industry's growth.
Modern technology, including smart devices, advanced computers, and intricate engineering tools, has seamlessly woven into every facet of our lives. The immense scale of the technology sector and its swift digital revolution across industries have firmly established it as a dominant force in the global economy.
Companies are investing substantially in technology and its management services, exemplified by the increasing corporate adoption of cloud-based software. Cloud computing enables users to access system features and files sans local storage, effectively handling the surge in data usage amidst the digital era's exponential growth.
Moreover, the widespread enthusiasm and integration of numerous advanced technologies by individuals and businesses, including Artificial Intelligence (AI), the Internet of Things (IoT), AR&VR, 5G, and machine learning, are further propelling the industry’s expansion.
Global tech expenditures are set for a rise in 2023. Gartner projects worldwide IT spending will surge to $4.7 trillion this year, signifying a 4.3% upswing from the prior year. In addition, worldwide IT spending for 2024 is expected to increase 8.8% year-over-year to $5.14 trillion. Simultaneously, ReportLinker projects the global information technology market to reach $12 trillion by 2027, growing at a 7.9% CAGR.
Driven by this technological progression and expansion into emerging markets, the global electronics market is forecasted to reach $4.99 trillion in 2030, growing at a robust 7.5% CAGR.
Against this backdrop, let's now take a closer look at sound tech stocks BRTHY, BELFB, and ELTK to examine what makes them worthwhile investments.
Brother Industries, Ltd. (BRTHY)
Headquartered in Nagoya, Japan, BRTHY manufactures and sells advanced communication and printing machinery. The company's segments encompass Printing & Solutions; Machinery; Domino; Nissei; Personal & Home; and Network & Contents, each contributing to its comprehensive range of offerings.
On May 22, BRTHY announced the establishment of its second technology center and machine tool showroom in Gurugram, Haryana State, India. This move by its subsidiary, BROTHER MACHINERY INDIA PRIVATE LTD., aims to proactively meet the escalating demand for machine tools driven by the burgeoning Indian automotive sector.
The technology center will be used to strengthen service support activities in the northern region of India and promote the high productivity of BRTHY's machine tools to customers through the display of the machines and demonstration of parts machining.
On February 7, BRTHY announced its intention to construct a machine tool production facility near Bengaluru, in the south of India. With a population surpassing 1.4 billion, India's ongoing demographic and economic expansion could enable BRTHY to strategically capitalize on this geographical expansion.
For the fiscal 2024 first quarter that ended June 30, 2023, BRTHY’s revenue marginally increased year-over-year to ¥200.41 billion ($1.37 billion). Its gross profit grew 4.5% from the year-ago value to ¥87.91 billion ($600.15 million).
Also, the company’s comprehensive income for the period came in at ¥54.37 billion ($371.17 million), up 12% from the prior year’s period. In addition, as of June 30, 2023, the company’s total assets stood at ¥873.28 billion ($5.96 billion), compared to ¥850.49 billion ($5.81 billion) as of March 31, 2022.
The consensus revenue estimate of $5.66 billion for the fiscal year ending March 2024 reflects a 65.1% rise year-over-year. Likewise, the consensus revenue estimate of $5.78 billion for the next fiscal year ending March 2025 indicates a 2.2% year-over-year improvement. Moreover, the company surpassed the consensus revenue estimates in three of four trailing quarters.
BRTHY’s shares have gained 18% over the past six months to close the last trading session at $34.01.
BRTHY’s strong fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
BRTHY has a B grade for Quality, Value, and Stability. It has ranked #2 in the 43-stock Technology - Electronics industry.
In addition to the POWR Ratings I’ve just highlighted, you can see BRTHY’s ratings for Sentiment, Momentum, and Growth here.
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.
On August 16, BELFB unveiled the RCM300 Series, an extension of its RCM converter line designed for railway and transportation systems. The addition comprises dual output DC-DC converters, ensuring dependable power with 300 W at +24 V / -24 V. These converters accommodate diverse railway battery inputs, bolstering BELFB's product portfolio.
On August 9, BELFB introduced the Johnson mmWave Angled 30-degree RF Connector Family, spanning SMA, 2.92mm, 2.4mm, and 1.85mm categories. With superior signal integrity up to 67 GHz, this advancement fortifies BELFB's presence in high-frequency applications across diverse industries.
During the second quarter that ended June 30, 2023, BELFB’s gross profit grew 22.2% year-over-year to $55.54 million. Its adjusted EBITDA rose 49.7% from the year-ago value to $28.62 million. Also, the company’s non-GAAP net earnings and class A EPS increased 48% and 45.4% year-over-year to $25.26 million and $1.89, respectively.
For the fiscal year ending December 2023, analysts expect BELFB’s EPS to increase 26.7% year-over-year to $5.84. Also, the company surpassed the consensus EPS estimates in all four trailing quarters. The stock has gained 78.5% over the past year, closing the last trading session at $49.74.
BELFB’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
BELFB has an A grade for Sentiment and Value and a B for Quality. It is ranked #3 in the 43-stock Technology – Electronics industry.
Click here to access the additional BELFB ratings (Growth, Momentum, and Stability).
Eltek Ltd. (ELTK)
Based in Petach Tikva, Israel, ELTK provides an array of tailored PCB solutions encompassing rigid, double-sided, and multi-layer variants alongside flexible circuit boards. The company additionally furnishes high-density interconnect, flex-rigid, and multi-layered boards to cater to intricate circuitry demands.
On June 27, ELTK declared the successful repayment of its $1.7 million bank debt, leaving the company with a cash balance of $7 million. Additionally, ELTK opted to expedite investments in production equipment, signaling a commitment to enhancing operational capabilities.
ELTK's operating cash flows, coupled with insurance receipts, facilitated bank debt repayment, effectively curbing future interest expenses. This strategic move, driven by improved cash flows, positions the company for enhanced financial stability and reduced interest burden.
For the second quarter that ended June 30, 2023, ELTK’s revenue increased 21.5% year-over-year to $11.04 million. Its non-GAAP EBITDA grew 114.3% from the prior year’s period to $1.70 million. Furthermore, the company’s net income and EPS rose 74.4% and 69.2% year-over-year to $1.31 million and $0.22, respectively.
The company’s revenue for the next fiscal year ending December 2024 is expected to increase 10% year-over-year to $51.31 million. Similarly, analysts expect ELTK’s EPS for the same period to come in at $1.24, up 12.7% from the previous year. Over the past six months, the stock has gained 98.3%, closing the last trading session at $8.19.
ELTK’s positive outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
ELTK has a B grade for Growth, Momentum, Sentiment, and Quality. It is ranked #4 out of 43 stocks within the same industry.
Click here to access additional ELTK’s ratings for Value and Stability.
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BRTHY shares were trading at $34.01 per share on Monday morning, down $1.01 (-2.88%). Year-to-date, BRTHY has gained 15.49%, versus a 16.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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