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 Pure Storage, Inc. (PSTG), Materialise NV (MTLS) and M-tron Industries, Inc. (MPTI).
Before delving deeper into their fundamentals, let’s discuss what’s happening in the tech industry.
The tech industry is evolving with new trends, constant innovations and disruptions that could reasonably drive growth. Moreover, firms focusing more on digital with access to advanced technologies while decreasing cost, growing usage of cloud technologies, and business intelligence to earn increased revenues are fueling growth in the IT market.
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 United States IT Services market is expected to grow at a CAGR of 6.5% until 2028.
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 light of these encouraging trends, let’s look at the fundamentals of the three top-rated Technology stocks.
Pure Storage, Inc. (PSTG)
PSTG provides data storage technologies, products, and services in the United States and internationally. The company’s Purity software is shared across its products and provides enterprise-class data services, such as data reduction, data protection, and encryption, as well as storage protocols, including block, file, and object.
On November 13, 2023, PSTG strengthened its AI storage portfolio with NVIDIA DGX BasePOD certification and Cisco Validated Designs, providing efficient, reliable access to data for AI applications. The company's commitment to advanced AI deployments reflects its leadership in the industry and underscores its focus on empowering organizations to navigate AI complexities, impacting business outcomes positively.
PSTG ensures that its AI storage solutions are compatible with industry-leading hardware by obtaining NVIDIA DGX BasePOD certification.
On October 10, 2023, PSTG announces critical data resilience offerings, including Pure Protect //DRaaS, a unique Disaster Recovery as a Service solution, and energy efficiency guarantees for its Evergreen portfolio. These advancements address industry pain points, enhance customer-centricity, and reinforce PSTG's commitment to providing secure, smart, and energy-efficient storage services for modern businesses, impacting its position in the market positively.
In terms of the trailing-12-month gross profit margin, PSTG’s 69.73% is 43.4% higher than the 48.61% industry average. Furthermore, the stock’s 7.48% trailing-12-month Capex/Sales is 219.9% higher than the industry average of 2.34%.
PSTG’s total revenue for the second quarter of 2024, increased 6.5% year-over-year to $688.67 million. The company’s non-GAAP total gross profit increased 10% year-over-year to $501.14 million. Its non-GAAP operating income increased 5.5% from prior year quarter to $111.82 million.
The company’s net income and net income per share also came in at $111.09 million and $0.34, registering an increment of 9.3% and 6.3%, respectively.
Over the past three years, PSTG’s revenue and levered free cash flow grew at a CAGRs of 17.8% and 24.9%, respectively. PSTG’s EPS and revenue for the first quarter of the year 2025, are expected to increase 165.6% and 21.2% year-over-year to $0.21 and $714.28 million, respectively. It has a commendable earnings surprise history, surpassing its consensus EPS estimates in each of the trailing four quarters and revenue estimates in three of the trailing four quarters.
Over the past six months, the stock has gained 50.5% to close the last trading session at $37.39.
PSTG’s 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 are calculated by considering 118 different factors, each weighted to an optimal degree.
It is ranked first in the A-rated Technology – Storage industry. In addition, it has a B grade for Growth, Sentiment and Quality. Click here to see additional ratings of PSTG for Value, Momentum and Stability.
Materialise NV (MTLS)
MTLS headquartered in Leuven, Belgium, operates in the additive manufacturing and medical software industries, providing 3D printing services and software solutions. The company functions through three segments, Materialise Software; Materialise Medical; and Materialise Manufacturing.
On November 7, MTLS and HP Inc., a global technology leader and provider of solutions for personal computing, printing, 3D printing, and other applications, announced a strategic collaboration to include HP's Multi Jet Fusion and Metal Jet additive manufacturing (AM) technology into the Materialise CO-AM software platform. This collaboration will allow manufacturers to improve the efficiency and quality of their 3D printing to meet industrial standards and use it for mass production of end parts.
On September 27, MTLS introduced a 3D-printed eyewear with an innovative translucent material. This material enhances MTLS’ business by expanding design possibilities for eyewear manufacturers, catering to consumer demand. This innovation may contribute to the company’s growth in the eyewear market.
On August 23, MTLS announced the opening of a new 3D printing facility in the United States, specializing in the production of personalized titanium cranio-maxillofacial (CMF) implants for facial reconstructive surgery. This is expected to enhance the operational capability of the company.
In terms of the trailing-12-month return on common equity, MTLS’s 1.13% is 40.2% higher than the 0.80% industry average. Likewise, its 0.68% trailing-12-month return on total assets is 852.4% higher than the industry average of 0.07%. Furthermore, the stock’s 4.89% trailing-12-month Capex/Sales is 109.3% higher than the industry average of 2.34%.
MTLS’ revenue for the fiscal third quarter that ended September 30 2023, increased 3.2% year-over-year to €60.13 million ($63.70 million), while its gross profit increased 5.2% from the previous-year value to €33.70 million ($35.70 million).Its adjusted EBITDA came in at €7.86 million ($8.57 million), showing an increment of 54.9% from the prior-year quarter. Also, As of September 30, 2023, MTLS’ total current liabilities stood at €93.60 million ($102.07 million) decreased 13.4% from €106.11 million ($115.61 million) as of December 31, 2022.
MTLS’ EBITDA and EBIT have increased at CAGRs of 19.3% and 310.5% over the past three years, respectively, while its tangible book value has improved at a CAGR of 24.2% in the same period.
Street expects MTLS’ revenue to increase 15.2% year-over-year for the fiscal year (ending December 2024) to $316.96 million. Its EPS is also bound to increase 115.9% in the same period to $0.24.
The stock has gained 26.4% over the past month to close the last trading session at $6.41.
It’s no surprise that MTLS has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
It has an A grade for Growth, Value and Sentiment. It is ranked first out of 5 stocks in Technology-3D Printing industry.
Beyond what is stated above, we’ve also rated MTLS for Momentum, Stability, and Quality. Get all MTLS ratings here.
M-tron Industries, Inc. (MPTI)
MPTI engages in the design, manufacture, and marketing of frequency and spectrum control products.
In terms of the trailing-12-month net income margin, MPTI’s 9.23% is 422% higher than the 1.77% industry average. Likewise, its 13.28% trailing-12-month EBIT margin is 183.1% higher than the industry average of 4.69%. Furthermore, the stock’s 19.64% return on common equity and 16.55% return on total assets is significantly higher than the industry averages of 0.80% and 0.07%, respectively.
MPTI’s revenues increased 29.4% year-over-year to $10.89 million in its fiscal third quarter (ended September 30, 2023). The company’s adjusted EBITDA increased 166.7% year-over-year to $2.34 million, while its net income grew 215.3% year-over-year to $1.59 million. Its net income per share increased 200% year-over-year to $0.57.
Street expects MPTI’s EPS to rise 345.5% year-over-year to $0.43 in the current quarter ending December 2023. Its revenue is expected to increase 29.1% year-over-year to $11.20 million for the same quarter. Also, the company has surpassed the consensus EPS estimates in three of four trailing quarters.
Shares of MPTI has gained 288.7% year-to-date and 254.3% over the past year to close its last trading session at $34.01.
It’s no surprise that the stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
MPTI has an A grade for Sentiment and Quality and a B in Growth. It has ranked #5 in the 40-stock-B-rated Technology – Electronics industry.
Beyond what is stated above, we’ve also rated MPTI for Value, Momentum, and Stability. Get all MPTI ratings here.
What To Do Next?
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PSTG shares were trading at $36.83 per share on Friday afternoon, down $0.56 (-1.50%). Year-to-date, PSTG has gained 37.63%, versus a 20.31% 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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