Despite the presence of macroeconomic volatilities, the tech sector is poised to excel this year, buoyed by its enduring demand. Thus, investors could consider investing in robust tech stocks Canon Inc. (CAJPY), TDK Corporation (TTDKY), and Teradata Corporation (TDC) to safeguard their portfolios. Moreover, these stocks are rated an A (Strong Buy) as per our proprietary POWR Ratings system.
Enterprises' heightened focus on digital transformation, aimed at enhancing efficiency and reducing operational costs, is driving a consistent demand for cutting-edge tech solutions. Gartner forecasts global IT spending to hit $5 trillion this year, a 6.8% year-over-year increase.
Moreover, the optimistic outlook for the tech industry is further bolstered by the rising adoption of cloud technologies, the integration of business intelligence for predictive analytics and operational optimization, the incorporation of AI, and the widespread implementation of IoT. In addition, the U.S. IT Services market is expected to reach $592.43 billion by 2028, growing at a CAGR of 6.5%.
Moreover, the global hardware market is projected to reach $191.03 billion by 2029, growing at a CAGR of 7.9%. The tech hardware industry is growing due to increased demand for hardware components driven by emerging technologies like AI and IoT. The proliferation of smart devices and the trend of remote work are also contributing factors.
Besides, advancements in hardware technology and the need for upgraded equipment further fuel growth in the sector.
In light of these encouraging trends, let's look at the fundamentals of the three best tech stocks.
Canon Inc. (CAJPY)
Headquartered in Tokyo, Japan, CAJPY manufactures and sells office multifunction devices (MFDs), laser and inkjet printers, cameras, medical equipment, and lithography equipment worldwide. The company operates through Printing Business Unit; Imaging Business Unit; Medical Business Unit; Industrial Business Unit; and other segments.
In terms of the trailing-12-month net income margin, CAJPY’s 6.44% is 174.5% higher than the 2.35% industry average. Likewise, its 8.93% trailing-12-month EBIT margin is 81.4% higher than the 4.92% industry average. Additionally, its 8.38% trailing-12-month Return on Common Equity is 642.5% higher than the 1.13% industry average.
The company pays an annual dividend of $0.93 per share, which translates to a dividend yield of 3.65% on the current share price. Its four-year average yield is 3.89%.
CAJPY’s trailing-12-month EBITDA and net income margins of 14.69% and 6.33% are 66.3% and 229.8% higher than the industry averages of 8.83% and 1.92%, respectively.
In the fiscal third quarter that ended September 30, 2023, CAJPY’s net sales and operating profit increased 2.9% and 1.5% year-over-year to $6.83 billion and $550.83 million, respectively. Moreover, its income before income taxes stood at $582.13 million, up 10.4% from the prior-year quarter.
Net income attributable to CAJPY and net income attributable to CAJPY shareholders per share stood at $414.23 million and $0.42, up 14.8% and 18.4% from the year-ago quarter, respectively.
Analysts expect CAJPY’s revenue to increase 158.6% year-over-year to $29.22 billion in the fiscal year 2024.
The stock has gained 20.8% over the past year to close the last trading session at $26.84. Over the past nine months, it has gained 15.6%.
CAJPY’s POWR Ratings reflect its positive prospects. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Quality and a B for Value, Momentum, and Stability. Within the A-rated Technology – Hardware industry, it is ranked #2 out of 36 stocks.
To see additional POWR Ratings for Growth and Sentiment for CAJPY, click here.
TDK Corporation (TTDKY)
Headquartered in Tokyo, Japan, TTDKY engages in the manufacture and sale of electronic components worldwide. The company operates through the following segments: Passive Components; Sensor Application Products; Magnetic Application Products; Energy Application Products; and Other segments.
TTDKY’s trailing-12-month ROCE and ROTA of 6.31% and 2.92% are 387.7% and 793.3% higher than the industry averages of 1.29% and 0.33%.
On January 9, 2024, TTDKY and The Goodyear Tire & Rubber Company, one of the world’s largest tire companies, announced a collaboration aimed at advancing next-generation tire solutions. The goal is to accelerate the development and adoption of integrated intelligent hardware and software into tires and vehicle ecosystems.
On January 4, TTDKY’s subsidiary, TDK Ventures, Inc., invested in Singaporean tech disruptor Silicon Box. The focus of the investment is on Silicon Box’s innovative semiconductor chiplet packaging design and fabrication capabilities, which set new standards in performance and scale.
The company pays $0.79, which yields 1.49% on the current market price. It has raised its dividend payouts at a CAGR of 10.5% over the past three years.
During the half-year ended September 30, 2023, TTDKY’s net sales amounted to YEN1.06 trillion (7.14 billion). Its operating profit and net profit attributable to owners of the parent stood at YEN85.55 billion ($57.59 million) and YEN54.19 billion ($36.48 million). Moreover, its EPS was YEN142.64.
Street expects TTDKY’s revenue to increase 282.4% year-over-year to $14.17 billion for the year ending March 2024. Its EPS is expected to come in at $2.19 for the same year.
TTDKY’s shares have soared 40.2% over the past year and 34.4% over the past three months to close its last trading session at $53.03.
TTDKY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has a B grade for Value, Stability, and Sentiment. Within the Technology – Hardware industry, it is ranked #4.
To see TTDKY’s additional Growth, Momentum, and Quality ratings, click here.
Teradata Corporation (TDC)
TDC provides a connected multicloud data platform for enterprise analytics. It offers Teradata Vantage, a data platform that allows companies to leverage their data across an enterprise, as well as connects various sources of data to drive ecosystem simplification and support customers’ journey to the cloud. They also provide business consulting services and support and maintenance services.
TDC’s trailing-12-month EBIT and EBITDA margins of 7.82% and 14.06% are 71.8% and 59.2% higher than the industry averages of 4.55% and 8.83%.
TDC’s total revenue for the fiscal third quarter that ended September 30, 2023, increased 5% year-over-year to $438 million. Its non-GAAP net income increased 34.4% year-over-year to $43 million. The company’s non-GAAP operating income rose 16.7% year-over-year to $63 million.
Also, its non-GAAP EPS came in at $0.42, representing an increase of 35.5% year-over-year.
TDC’s revenue and EPS for the quarter ended December 2023 are expected to increase 1.4% and 47.6% year-over-year to $458.19 million and $0.52, respectively. It topped the consensus EPS estimates in three of the trailing four quarters, which is impressive.
Over the past year, the stock has gained 31% to close the last trading session at $47.93.
TDC’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 Quality and a B in Growth and Value. Within the Technology – Services industry, it is ranked #2 out of 76 stocks.
In addition to the ratings stated above, one can access TDC’s Momentum, Stability, and Sentiment 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.
CAJPY shares were trading at $26.96 per share on Tuesday morning, down $0.02 (-0.07%). Year-to-date, CAJPY has gained 5.31%, versus a 3.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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