The technology industry has been flourishing over the past two years, driven by the remote working environment, accelerating digital transformation, and emerging new and advanced technologies. International Data Corporation (IDC) says that the tech industry is expected to be valued at more than $5.30 trillion in 2022.
The global tech market is growing at a healthy clip, with significant growth in tech categories that include IT software, infrastructure, solutions, services, and other emerging technologies, including IoT, 5G, artificial intelligence (AI), virtual reality (VR), robotics, and autonomous systems. Despite looming interest rates increases, the tech industry is projected to maintain its growth trajectory over the long run, thanks to technology integration in virtually every industry worldwide.
Given the tech industry's impressive long-term growth prospects, we think the ongoing sector correction might be an ideal entry point into quality undervalued stocks Himax Technologies, Inc. (HIMX), Cognyte Software Ltd. (CGNT), and Gravity Co., Ltd. (GRVY).
Himax Technologies, Inc. (HIMX)
HIMX is a fabless semiconductor company headquartered in Tainan City, Taiwan. The company offers display imaging processing technologies in China, Taiwan, Korea, Japan, the Philippines, Europe, and the U.S. It operates through two segments: Driver IC; and non-driver Products. HIMX provides display driver integrated circuits (ICs), timing controllers used in consumer electronic devices, controllers for touch sensor displays, metal oxide semiconductor image sensors, and more.
On Jan. 14, 2022, HIMX introduced an industry-first 288Hz 8K TV TCON solution for the ultra-high resolution 8K gaming TV market. HIMX collaborated with major TV panel makers to develop this display technology. HIMX is expected to drive innovation, penetrate new markets, and boost revenues.
On Dec. 17, 2021, HIMX's second-generation automotive TDDI was adopted broadly by new vehicle manufacturers, Tier-1 suppliers, and panel makers worldwide for the new car models to be released to the public between 2022 to 2024. HIMX might extend its reach by securing long-term agreements with foundry partners and customers, increasing its revenue streams, and boosting business growth.
In its fiscal 2021 fourth quarter, ended December 31, HIMX's revenues increased 63.9% year-over-year to $451.86 million. Its operating income increased 321.8% year-over-year to $177.95 million. The company's profit rose 324.3% from the same period last year to $141.47 million. And profit attributable to HIMX stockholders grew 318.7% year-over-year to $142.39 million, and earnings per ADS attributable to HIMX stockholders increased 317.9% from the year-ago value to $0.82.
HIMX is relatively undervalued compared to its peers. In terms of forward non-GAAP P/E, HIMX is currently trading at 4.25x, which is 78.6% lower than the 19.86x industry average. Its 1.14 forward Price/Sales multiple is 67% lower than the 3.47x industry average. Its forward Price/ Cash Flow and EV/EBITDA ratios of 3.91 and 2.95, respectively, compare with 19.27 and 13.68 industry averages.
Analysts expect HIMX's revenue for its fiscal first quarter, ending March 2022, to be $429.60 million, representing a 39% rise year-over-year. The Street expects the company's EPS for the current quarter to come in at $0.72, representing an 87.5% increase year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock gained 10.6% in price over the past three months to close yesterday's trading session at $11.02.
Under the POWR Ratings, HIMX has an A grade for Value and a B for Growth. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Within the A-rated Semiconductor & Wireless Chip industry, it is ranked #61 of 97 stocks. To see additional POWR Ratings (Momentum, Stability, Quality, and Sentiment) for HIMX, click here.
Click here to checkout our Semiconductor Industry Report for 2022
Cognyte Software Ltd. (CGNT)
CGNT is a provider of security analytics software to governments and enterprises worldwide. It is headquartered in Herzliya, Israel. The company offers a wide range of solutions, including investigative analytics, threat intelligence analytics, and operational intelligence analytics solutions. CGNT's end-users for its solutions include data analysts, investigation managers, government agencies, enterprise customers, and security operating centers operators.
CGNT's total revenue increased 4.4% year-over-year to $118.72 million in its fiscal third quarter, ended Oct. 31, 2021. CGNT's gross profit increased 4.4% year-over-year to $87.49 million.
CGNT is trading at a discount to its peers. In terms of forward non-GAAP P/E, CGNT is currently trading at 13.00x, which is 34.5% lower than the 19.86x industry average Its 1.45 forward Price/Sales multiple is 58.1% lower than the 3.47x industry average. And CGNT's 7.75 forward EV/EBITDA ratio compares with the 13.68 industry average.
The $129.56 million consensus revenue estimate for its fiscal fourth quarter, ended January 2022, represents 4.5% year-over-year growth. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of CGNT increased 3.9% in price over the past five days and closed yesterday's trading session at $10.10.
CGNT's POWR Ratings reflect this promising outlook. CGNT has an overall rating of B, which translates to Buy in our POWR Ratings system. It has a grade of A for Value and Sentiment and B for Growth and Quality. It is ranked #13 of 164 stocks in the Software - Application industry. Click here to see CGNT ratings for Momentum and Stability.
Click here to check out our Software Industry Report for 2022
Gravity Co., Ltd. (GRVY)
GRVY develops, markets, and distributes online games primarily in South Korea, Taiwan, the Philippines, Thailand, and internationally. It is headquartered in Seoul, South Korea. The company's mobile games portfolio includes Ragnarok M: Eternal Love, Ragnarok Origin, Sacred Blade Dark Eden, Ragnarok Poring Merge, the Lord, and many more. In addition, it offers system development and maintenance services and system integration services to third parties.
This month, GRVY launched the first CBT for its 3D MMORPG for 2022, Ragnarok V: Returns in Oceania. The company is expected to increase users' satisfaction with this new launch. GRVY might expand its global users' base and boost its revenue streams.
Last December, GRVY launched Ragnarok: The Lost Memories in the Philippines, Singapore, and Malaysia. Ragnarok: The Lost Memories is a Cinematic Newtro RPG mobile game based on Ragnarok. These new launches might expand GRVY's customer base and increase the company’s profits.
In its fiscal 2021 third quarter, ended September 30, GRVY's gross profit increased 8.4% year-over-year to $52.82 million. Its operating profit increased 17.1% year-over-year to $34 million. The company's profit for the year rose 4% from the same period last year to $22.21 million. And its earnings per share increased 4.2% from its year-ago value to $3.20.
GRVY is relatively undervalued compared to its peers. In terms of TTM GAAP P/E, GRVY is currently trading at 5.48x, which is 70.5% lower than the 18.61x industry average. Its 1.02 TTM Price/Sales multiple is 39.1% lower than the 1.67x industry average. GRVY's 1.80 TTM EV/EBITDA ratio compares with the 9.75 industry average.
GRVY increased 10.6% in price over the past five days and closed yesterday's trading session at $50.25.
GRVY has an overall B rating, which translates to Buy in our POWR Ratings system. It has a grade of A for Value and a grade B for Quality and Sentiment. Within the Entertainment Toys & Video Games industry, it is ranked #5 of 22 stocks.
Click here to see additional component grades for GRVY (Growth, Stability, and Momentum).
HIMX shares were trading at $11.17 per share on Wednesday afternoon, up $0.15 (+1.36%). Year-to-date, HIMX has declined -30.14%, versus a -10.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
3 Undervalued Tech Stocks Down More Than 25% YTD to Buy Right Now StockNews.com
