The tech industry is booming globally due to the widespread adoption of automation, significant investments in digitization initiatives, and the integration of advanced technologies such as generative AI.
Considering these factors, investors could consider buying fundamentally strong tech stocks TDK Corporation (TTDKY), Seiko Epson Corporation (SEKEY), and Gilat Satellite Networks Ltd. (GILT).
Before delving deeper into their fundamentals, let’s discuss why the tech industry is growing.
Globally, enterprises are boosting their digital capabilities through investments in digital transformation, driving positive momentum for tech firms. This trend highlights technology's pivotal role in revolutionizing operations, enhancing resilience, and improving productivity.
Businesses are investing in digitization to gain agility, scalability, and a competitive edge. They are also focusing on improving customer satisfaction and operational efficiency.
The surge in digitization initiatives drives demand for advanced hardware solutions to meet complex processing demands and increased workloads. The IT hardware market is expected to grow at a 7.9% CAGR, reaching $191.03 billion by 2029.
Similarly, the demand for advanced communication and networking equipment is increasing due to the rise of emerging technologies such as 5G, Network Function Virtualization (NFV), IoT integration, growing data traffic, expanding data centers, and cloud services adoption.
The global optical communication and networking equipment market is expected to grow at a CAGR of 15.8%, reaching $107.46 billion by 2030. Furthermore, investors’ interest in tech stocks is evident from the Technology Select Sector SPDR Fund’s (XLK) 46.1% returns over the past year.
Considering these conducive trends, let’s analyze the fundamentals of the abovementioned technology stocks.
TDK Corporation (TTDKY)
Headquartered in Tokyo, Japan, TTDKY and its subsidiaries manufacture and sell electronic components internationally. The company operates through Passive Components, Sensor Application Products, Magnetic Application Products, Energy Application Products, and Other segments.
In terms of the trailing-12-month Return on Common Equity, TTDKY’s 6.31% is 107.1% higher than the 3.05% industry average. Likewise, its 3.73% trailing-12-month Return on Total Capital is 57.7% higher than the industry average of 2.37%. Its 0.64x trailing-12-month asset turnover ratio is 6.1% higher than the industry average of 0.61x.
For the third quarter that ended December 31, 2023, TTDKY’s net sales came in at ¥559.25 billion ($3.69 billion). Its operating profit increased 2.7% year-over-year to ¥70.20 billion ($463.58 million). Likewise, its net profit attributable to owners of parent and EPS came in at ¥65.30 billion ($431.23 million) and ¥171.88, up 30.8% each over the prior-year quarter, respectively.
Street expects TTDKY’s revenue for the quarter ending September 30, 2024, to increase 5.4% year-over-year to $3.88 billion. Its EPS for fiscal 2024 is expected to increase 2.3% year-over-year to $2.26. Over the past year, the stock has gained 48% to close the last trading session at $50.74.
TTDKY’s POWR Ratings reflect robust prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #4 out of 37 stocks in the B-rated Technology - Hardware industry. It has a B grade for Growth, Value, and Stability. Click here to see TTDKY’s Momentum, Sentiment, and Quality ratings.
Seiko Epson Corporation (SEKEY)
Headquartered in Suwa, Japan, SEKEY and its subsidiaries develop, manufacture, sell, and provide services for products in printing solutions, visual communications, manufacturing-related and wearables, and other businesses. The company operates through three segments: Printing Solutions, Visual Communications, and Manufacturing-related and Wearables.
On January 19, 2024, SEKEY and DBJ invested in 3DEO Inc., a startup based in California. 3DEO specializes in metal additive manufacturing technology for designing and manufacturing complex metal parts. This investment aims to support 3DEO's business expansion in North America and Japan, promoting innovation and competitiveness in the manufacturing industry.
In terms of the trailing-12-month net income margin, SEKEY’s 4.22% is 60.7% higher than the 2.63% industry average. Likewise, its 7.61% trailing-12-month Return on Common Equity is 149.8% higher than the industry average of 3.05%. Additionally, its 3.90% trailing-12-month Capex / Sales is 71.7% higher than the industry average of 2.27%.
For the fiscal nine months that ended December 31, 2023, SEKEY’s revenue came in at ¥992.10 billion ($6.55 billion) and its profit from operating activities stood at $¥51.70 billion ($341.41 million). Moreover, its profit for the period attributable to owners of the parent company and EPS came in at $¥42.47 billion ($28.05 million) and $¥128.06, respectively.
For the quarter ending September 30, 2024, SEKEY’s revenue is expected to increase 1.9% year-over-year to $2.21 billion. Over the past year, SEKEY’s stock has gained 23.7% to close the last trading session at $8.60.
SEKEY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and Momentum and a B for Stability and Quality. Within the same industry, it is ranked #5. To access the additional ratings of SEKEY for Growth and Sentiment, click here.
Gilat Satellite Networks Ltd. (GILT)
Headquartered in Petah Tikva, Israel, GILT and its subsidiaries provide satellite-based broadband communication solutions in Israel, the United States, Peru, and internationally. It operates in three segments: Satellite Networks, Integrated Solutions, and Network Infrastructure and Services.
On March 5, 2024, GILT announced its selection by Safran Passenger Innovations for a strategic, multimillion-dollar in-flight connectivity (IFC) program, expanding its product portfolio with Ku band Power Supply Unit (KPSU) products to support Safran's Ku-band electronically steerable antenna (ESA) and driving growth in the IFC market.
Bob Huffman, Senior VP at GILT, said, “We are delighted to have been awarded this competitive contract. We look forward to building the next generation of IFC equipment with these new products and continuing our industry-leading position as the premier supplier of PSUs and SSPAs for the IFC marketplace.”
On March 19, 2024, GILT unveiled its Cloud and 5G NTN evolution strategy for SkyEdge IV. This strategy ensures continuous advancement and seamless integration with evolving technology standards, aimed at supporting Satellite Operators and service providers in the digital transformation of the satellite communications industry.
In terms of the trailing-12-month EBIT margin, GILT’s 10.55% is 115.9% higher than the 4.89% industry average. Its 15.59% trailing-12-month EBITDA margin is 72.5% higher than the 9.04% industry average. Likewise, its 6.53% trailing-12-month Return on Total Capital is 175.9% higher than the industry average of 2.37%.
GILT’s revenues for the fiscal year ended December 31, 2023, increased 10.9% year-over-year to $266.09 million. Its non-GAAP gross profit rose 21.4% over the prior-year quarter to $105.840 million.
Its non-GAAP net income rose 88.7% over the prior-year quarter to $19.91 million. Also, its non-GAAP EPS came in at $0.35, representing an increase of 84.2% year-over-year.
Analysts expect GILT’s revenue for the quarter ending March 31, 2024, to increase 30.8% year-over-year to $77.10 million. Its EPS for the fiscal 2025 is expected to increase 18.2% year-over-year to $0.39. Over the past year, the stock has gained 7% to close the last trading session at $5.68.
GILT’s 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.
It has an A grade for Sentiment and a B for Value and Quality. Within the Technology – Communication/Networking industry, it is ranked first out of 46 stocks. To see GILT’s Growth, Momentum, and Stability ratings, click here.
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TTDKY shares were trading at $50.74 per share on Thursday morning, up $0.72 (+1.44%). Year-to-date, TTDKY has gained 7.23%, versus a 10.39% 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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