The tech sector is witnessing rapid growth due to the growing demand for new innovative solutions, rising spending on digitization, and the adoption of cutting-edge devices. Therefore, fundamentally strong tech stocks Ricoh Company, Ltd. (RICOY), AvePoint, Inc. (AVPT), and RADCOM Ltd. (RDCM) could be ideal additions to one’s portfolio.
Before exploring the fundamentals of these stocks, let’s first understand what’s shaping the tech industry’s prospects.
The tech sector is one of the fastest-growing sectors due to its continuous innovations and cutting-edge products. The industry caters to the rising digitization demands of various sectors. Gartner projects worldwide IT spending to hit $5.06 trillion, representing an 8% year-over-year growth in 2024. It expects worldwide IT spending to exceed $8 trillion before the end of 2030.
With technology evolving, cutting-edge hardware solutions are required to manage the various data-intensive workloads. Additionally, advanced hardware components are required for the seamless functioning of various machine learning, artificial intelligence (AI), and the Internet of Things (IoT) applications. The IT hardware market is projected to grow at a CAGR of 7.9% to reach $191.03 billion by 2029.
Also, Gartner expects spending on devices this year to rise 3.6% year-over-year to $687.94 billion. Furthermore, a surge in the demand for cloud services and cybersecurity solutions, along with the increasing utilization of AI, machine learning, and data analytics tools, are driving the demand for tech services.
The global IT services market is estimated to grow at a CAGR of 9.7%, reaching $2.59 trillion by 2030. Investors’ interest in tech stocks is evident from the Vanguard Information Technology Index Fund ETF Shares’ (VGT) 21.8% returns over the past six months.
Considering these conducive trends, let’s examine the fundamentals of the three tech stocks mentioned above.
Ricoh Company, Ltd. (RICOY)
Headquartered in Tokyo, Japan, RICOY provides office, commercial printing, and related solutions worldwide. It operates through Digital services, Digital Products, Graphic Communications, Industrial Solutions, and Other segments.
On April 22, RICOY announced the acquisition of natif.ai, a German software startup company offering AI-enabled Intelligent Capture, advanced image recognition, and optical character recognition technologies.
This acquisition will enhance the data extraction function of RICOY's Process Automation portfolio from various documents, including paper and handwritten documents, that have enabled RICOY to offer its customers automation and sophistication in a wide range of business processes.
RICOY’s trailing-12-month Return on Common Equity of 5.93% is 81.2% higher than the industry average of 3.27%. Its trailing-12-month Return on Total Capital and Return on Total Assets of 3.08% and 2.59% are 31.3% and 78.2% higher than the industry averages of 2.34% and 1.45%, respectively.
RICOY’s sales and gross profit for the fiscal third quarter that ended December 31, 2023, increased 5.4% and 9.3% year-over-year to ¥585.10 billion ($3.76 billion) and ¥210.39 billion ($1.35 billion), respectively.
For the same quarter, its profit attributable to owners of the parent and earnings per share attributable to owners of the parent stood at ¥14.66 billion ($94.25 million) and ¥24.06, up 17.1% and 3.5% from the prior-year quarter, respectively.
Street expects RICOY’s revenue for the quarter ending September 30, 2024, to increase 1.1% year-over-year to $3.87 billion. The company surpassed consensus revenue estimates in three of the trailing four quarters, which is impressive. The stock has gained 13.9% year-to-date to close the last trading session at $8.78.
RICOY’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an A grade for Value, Momentum, and Stability. It is ranked #11 out of 38 stocks in the B-rated Technology - Hardware industry. Click here to see the additional POWR Ratings for RICOY (Growth, Sentiment, and Quality).
AvePoint, Inc. (AVPT)
AVPT provides a cloud-native data management software platform in North America, Europe, the Middle East, Africa, and Asia Pacific. It also offers software-as-a-service solutions and productivity applications.
On February 21, AVPT announced the addition of three new products to its FedRAMP authorization as a Software as a Service (SaaS) company, implying their rigorously tested security controls and its user-verified SaaS solutions within all federal agencies.
AVPT’s trailing-12-month asset turnover ratio of 0.63x is 3% higher than the industry average of 0.62x. Similarly, its trailing-12-month levered FCF margin of 14.50% is 51.8% higher than the industry average of 9.55%.
AVPT’s total revenue and non-GAAP gross profit for the fiscal fourth quarter that ended December 31, 2023, stood at $74.62 million and $56.11 million, up 17.3% and 22.2% year-over-year, respectively.
For the same quarter, its net income available to common shareholders stood at $4.27 million, compared to a net loss available to common shareholders of $12.72 million in the year-ago quarter. Its earnings per share stood at $0.02, compared to a loss per share of $0.07 in the prior-year quarter.
For the quarter ending September 30, 2024, AVPT’s EPS is expected to increase 30.5% year-over-year to $0.04. Its EPS for the quarter that ended March 31, 2024, is expected to grow 21.4% year-over-year to $72.33 million. The company surpassed consensus revenue estimates in each of the trailing four quarters. Over the past year, the stock has gained 93.2%, closing the last trading session at $7.92.
AVPT’s POWR Ratings reflect its positive prospects. It has an overall B rating, equating to Buy in our proprietary rating system.
AVPT has a B grade for Growth and Quality. Within the Technology - Services industry, it is ranked #15 out of 78 stocks. To see the additional POWR Ratings of AVPT for Value, Momentum, Stability, and Sentiment, click here.
RADCOM Ltd. (RDCM)
Headquartered in Tel Aviv, Israel, RDCM provides 5G-ready cloud-native, network intelligence, and service assurance solutions for telecom operators or communication service providers (CSPs).
On April 8, RDCM announced the renewal of its multi-year collaboration with Rakuten Mobile Inc., which will continue to provide current solution offerings, including advanced AI-powered analytics such as anomaly detection and automated root cause analysis.
These advanced AI-driven use cases will help proactively identify and prevent degradations, enabling Rakuten Mobile to maintain efficient network operations and network automation.
RDCM’s trailing-12-month gross profit margin and net income margin of 73.31% and 7.20% are 50.8% and 185.6% higher than the industry averages of 48.61% and 2.52%, respectively.
RDCM’s revenues and non-GAAP gross profit for the fiscal fourth quarter that ended December 31, 2023, stood at $14.01 million and $10.70 million, up 14% and 18.9% year-over-year, respectively. For the same quarter, its non-GAAP net income and net income per share increased 191.4% and 177.8% from the year-ago quarter to $3.85 million and $0.25, respectively.
Analysts expect RDCM’s revenue and EPS for the quarter that ended March 31, 2024, to increase 11.1% and 150% year-over-year to $13.36 million and $0.10, respectively. The company surpassed consensus EPS estimates in three of the trailing four quarters. The stock has gained 8.3% over the past six months to close the last trading session at $8.66.
RDCM’s POWR Ratings reflect this promising outlook. It has an overall rating of B, equating to Buy in our proprietary rating system.
RDCM has an A grade for Growth and Sentiment and a B for Stability. Within the Technology Services industry, it is ranked #10. To see RDCM’s Value, Momentum, and Quality ratings, click here.
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RICOY shares were unchanged in premarket trading Friday. Year-to-date, RICOY has gained 13.96%, versus a 7.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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