Businesses are embracing new digital technologies at an accelerating pace, enhancing their products and services. This digital shift is setting the stage for significant transformations across multiple sectors. As companies adapt and evolve, the tech sector is becoming a focal point for investors.
In this landscape, stocks such as Hewlett Packard Enterprise Company (HPE), Jabil Inc. (JBL), and Flex Ltd. (FLEX) stand out. With their low P/E ratios and strong growth potential, these companies offer enticing opportunities for those seeking to capitalize on the expanding tech landscape.
Each day brings new advancements in technology, driven by groundbreaking research, product launches, and shifts in consumer needs. Artificial Intelligence (AI) plays a central role in this evolution. As AI continues to rise, companies are investing in cloud infrastructure and connectivity to keep pace.
Generative AI (genAI), in particular, has been pivotal in driving digital transformation, offering innovative solutions to industries ranging from financial services to customer support and product development.
The Generative AI market is expected to reach $36.06 billion by 2024. With a projected annual growth rate of 46.5%, the market is set to expand significantly, reaching $356.10 billion by 2030. Immersive technologies, such as virtual and augmented reality, are also accelerating the sector’s growth.
By combining these technologies with computing power, companies can improve the accuracy and safety of infrastructure projects while advancing sustainability through better planning and execution.
President Biden’s 2024 Budget reflects this growing importance of technology by allocating $729 million to AI research and development at the National Science Foundation (NSF). The budget includes $30 million dedicated to the second year of the National AI Research Resource Pilot.
With the tech sector thriving, investors are gravitating towards stocks with lower P/E ratios, as these offer greater value for each dollar of earnings. A lower P/E ratio represents a more appealing price tag, attracting investors who seek a balance between cost and growth potential.
Considering the trends in the industry, let us discuss the fundamentals of three tech stocks, starting with #3.
Stock #3: Hewlett Packard Enterprise Company (HPE)
HPE is a global technology company that offers general-purpose servers, hybrid cloud solutions, wired and wireless networks, and flexible investment solutions for technology deployment models. It operates under the Server; Hybrid Cloud; Intelligent Edge; Financial Services; Corporate Investments and Other segments.
On September 24, HPE announced the expansion of its AI-powered network management solution, HPE Aruba Networking Central. The new expansion provides much-needed AI insights and capabilities to control, predict, and manage its customer's networks and establish itself in a strong position in the AI industry.
On September 16, HPE announced a new private cloud services deal with Barclays PLC (BCS), the British universal bank, to include HPE GreenLake Cloud in BCS’ hybrid cloud strategy. Through this partnership, HPE aims to expand its global client base, enhancing its international presence and driving business growth.
In terms of forward non-GAAP P/E, HPE is trading at 9.64x, 60.2% lower than the industry average of 24.19x. Likewise, the stock’s forward EV/EBIT and forward Price/Cash flow multiples of 10.67 and 6.30 are 47.3% and 71.5% lower than their respective industry averages of 20.28x and 22.12x.
During the fiscal 2024 third quarter that ended July 31, HPE’s net revenue increased 10.1% year-over-year to $7.71 billion. Its non-GAAP earnings from operations grew 7.4% from the year-ago value to $771 million.
In addition, HPE’s non-GAAP net earnings and non-GAAP EPS rose 3.4% and 2% from the prior year’s period to $661 million and $0.50, respectively.
Analysts expect HPE’s revenue for the fiscal fourth quarter ending in October 2024 to increase 12.4% year-over-year to $8.26 billion. Its EPS for the ongoing quarter is expected to grow 7.2% from the prior year’s period to $0.56. Moreover, the company surpassed the consensus EPS estimates in all four trailing quarters.
Shares of HPE have gained 14.1% over the past six months and 16.4% over the past year to close the last trading session at $19.85.
HPE’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
HPE has a B grade for Value and Sentiment. Within the 45-stock Technology – Communication/Networking industry, the stock is ranked #8.
Click here to access additional HPE ratings for Momentum, Growth, Quality, and Stability.
Stock #2: Jabil Inc. (JBL)
JBL is a manufacturing solutions provider offering comprehensive electronics design, production, and product management services. The company operates through two segments, Electronics Manufacturing Services (EMS) and Diversified Manufacturing Services (DMS).
On September 23, JBL announced its continued investment in silicon photonics-based products and capabilities to facilitate the growing demands due to next-wave cloud and AI data center growth. With additional capabilities planned to roll out in the future, JBL is catering to the evolving market demands and securing itself in a top market position.
On September 10, JBL announced the signing of a Memorandum of Understanding (MoU) with the Tamil Nadu state government as part of the company’s expansion in Tiruchirappalli, Tamil Nadu, India. With an emerging market in India, JBL’s expansions to emerging nations will enhance the company’s portfolio and growth prospects.
In terms of forward non-GAAP P/E, JBL is trading at 13.43x, 44.5% lower than the industry average of 23.19x. Its forward EV/EBITDA of 5.93x is 58.6% lower than the sector average of 14.31x. In addition, the stock’s forward Price/Cash flow of 8.15x is 63.2% lower than the industry average of 22.12x.
For the fiscal 2024 third quarter that ended May 31, JBL’s net revenue came in at $6.77 billion. The company’s core operating income was reported to be $350 million. Additionally, its core earnings came in at $230 million or $1.89 per share.
As of May 31, 2024, JBL’s cash and cash equivalents stood at $2.46 billion compared to $1.80 billion on August 31, 2023.
The consensus EPS estimate of $8.62 for the fiscal year ending August 2025 reflects a rise of 2.7% year-over-year. Furthermore, the company topped the consensus EPS estimates in three of the four trailing quarters.
Shares of JBL have gained 5.7% over the past month and 6.6% over the past year to close the last trading session at $114.62.
JBL’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
JBL has an A grade for Momentum and a B for Value and Quality. It is ranked #15 out of 75 stocks in the Technology – Services industry.
In addition to the POWR Ratings we’ve stated above, we also have JBL’s ratings for Growth, Sentiment, and Stability. Get all JBL ratings here.
Stock #1: Flex Ltd. (FLEX)
FLEX offers manufacturing solutions and services through two segments: Flex Agility Solutions (FAS) and Flex Reliability Solutions (FRS). FAS covers various end markets like Communications, Enterprise, and Cloud (CEC). Meanwhile, FRS covers automotive, health solutions, and industrial sectors.
On August 22, Anord Mardix, a FLEX company, announced the opening of a second facility named D2 in Dundalk, Ireland. This facility is aimed at serving as an assembly hub for switchgear products to ensure efficiency in the production process of reliable and uninterrupted data center power from the grid.
With AI data centers facing power challenges, FLEX is providing the necessary means to facilitate the incoming AI revolution.
On August 8, FLEX announced a collaboration with Musashi Energy Solutions, a designer and developer of high-power, long-lasting, and safe Hybrid SuperCapacitors, to supply FLEX-designed and manufactured Capacitor-based Energy Storage Systems (CESS), including Musashi's Hybrid SuperCapacitor (HSC) technology.
As energy consumption increases rapidly worldwide, FLEX’s innovations could help the company gather significant exposure in the global energy management sector.
In terms of forward non-GAAP P/E, FLEX is trading at 13.31x, 45% lower than the industry average of 24.19x. Furthermore, the stock’s forward EV/EBITDA and forward Price/Cash flow multiples of 7.77 and 10.25 are 45.7% and 53.7% lower than their respective industry averages of 14.31x and 22.12x.
During the fiscal 2025 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. Continuing
Moreover, its non-GAAP net income from continuing operations stood at $211 million, while its non-GAAP EPS rose 8.5% from the prior-year quarter to $0.51.
Street expects FLEX’s revenue and EPS for the fiscal year ending March 2026, to increase 4.8% and 15.2% year-over-year to $27.17 billion and $2.78, respectively. In addition, the company topped the consensus EPS estimates in each of the trailing four quarters.
Shares of FLEX have gained 11.5% over the past six months and 23.8% over the past year to close the last trading session at $32.04.
It’s no surprise that FLEX has an overall rating of B, which translates to a Buy in our proprietary rating system.
FLEX has an A grade for Momentum and a B for Value. Within the Technology – Services industry, it is ranked #22 out of 75 stocks.
Beyond what we have stated above, we also have given FLEX grades for Growth, Stability, Sentiment, and Quality. Get all the FLEX ratings here.
What To Do Next?
43-year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
HPE shares were trading at $19.82 per share on Wednesday afternoon, up $0.94 (+4.98%). Year-to-date, HPE has gained 19.14%, versus a 21.17% 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.
3 Tech Stocks with Low P/E Ratios That Offer Big Upside StockNews.com
