The technology industry is well-positioned to witness solid growth and expansion in the long run, driven by the rapid adoption of advanced technologies and growing spending on tech in the private and public sectors. Given the industry tailwinds, it could be wise to invest in leading tech stocks N-able, Inc. (NABL) and Key Tronic Corporation (KTCC) for solid gains.
Since last year, the technology industry grappled with multiple macroeconomic headwinds, such as supply chain disruptions, geopolitical unrest, inflation, massive layoffs, and a tightening interest rate environment.
Nonetheless, the tech industry remains optimistic about its long-term outlook, given its ability to shape and impact different business segments among various sectors, using digital advancements to support innovation and transformation.
Moreover, with the widespread adoption of emerging technologies, including AI, cloud computing, blockchain, AR&VR, metaverse, and IoT, digital transformation is happening at an accelerated pace, presenting numerous opportunities for the tech industry.
John-David Lovelock, Distinguished VP Analyst at Gartner Inc. (IT), said, “Macroeconomic headwinds are not slowing digital transformation.” He added, “IT spending will remain strong, even as many countries are projected to have near-flat gross domestic product (GDP) growth and high inflation in 2023.”
According to Gartner, global IT spending is expected to grow 5.5% year-over-year to $4.6 trillion this year.
The global information technology market is projected to reach $6.20 trillion by 2028, growing at a 4.5% CAGR, as per a report by Digital Journal. Moreover, investors’ interest in tech stocks is evident from the iShares U.S. Technology ETF’s (IYW) 20.4% returns over the past six months.
Given this context, investors could consider buying fundamentally sound tech stocks NABL and KTCC, which are well-positioned to capitalize on the industry's growth prospects.
Let’s discuss these stocks in detail.
N-able, Inc. (NABL)
NABL delivers cloud-based software solutions to Managed Service Providers (MSPs), facilitating digital transformation and growth in small to medium-sized enterprises. Its enterprise-grade software platform serves as an operating system for MSP partners, supporting scalability and growth in their businesses.
Yesterday, NABL announced that it had expanded the Continuity features in Cove Data Protection™ by introducing Standby Image recovery in Microsoft Azure. This new feature enhances disaster recovery as a service (DRaaS), providing MSPs and IT professionals with a comprehensive range of recovery services to offer their end-users.
This could enhance the company’s reputation as a provider of innovative and comprehensive data protection services, enabling increased demand for NABL’s DRaaS solutions and potentially leading to new partnerships and customers.
Moreover, on February 9, NABL launched N-able Managed Endpoint Detection and Response (Managed EDR), a threat monitoring, hunting, and response service for MSPs. The new service enables NABL to scale its security operations with an enterprise-grade SOC, offering native EDR technology and expertise to MSPs. The new launch should bode well for the company.
NABL’s trailing-12-month gross profit margin of 84.61% is 71.2% higher than the 49.4% industry average. Its trailing-12-month EBITDA margin of 18.99% is 113% higher than the 8.92% industry average.
NABL’s non-GAAP gross profit grew 8.3% year-over-year to $84.41 million for the first quarter that ended March 31, 2023. Its non-GAAP operating income rose 18.3% from the prior year’s quarter to $27.09 million.
Additionally, its adjusted EBITDA came in at $32.75 million, up 21.1% year-over-year. As of March 31, 2023, the company’s current assets stood at $162.62 million, compared to $154.16 million as of December 31, 2022.
The consensus revenue estimate of $459.66 million for the fiscal year ending December 2024 reflects an 11.5% year-over-year improvement. Likewise, the consensus EPS estimate of $0.35 for the next year indicates a growth of 15.2% year-over-year. Moreover, the company surpassed the consensus revenue estimates in all four trailing quarters.
Over the past year, the stock has gained 57.1% to close the last trading session at $13.78.
NABL’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
NABL has a B grade for Growth, Sentiment, and Stability. It is ranked #15 in the 79-stock Technology - Services industry.
In addition to the POWR Ratings I’ve just highlighted, you can see NABL’s ratings for Value, Quality, and Momentum here.
Key Tronic Corporation (KTCC)
KTCC offers integrated engineering, assembly, procurement, and testing services. Its services include product design, tool making, plastic molding, sheet metal fabrication, painting, injection molding, complex assembly, and prototype design. The company also manufactures and sells keyboards and other input devices.
KTCC’s trailing-12-month asset turnover ratio of 1.31x is 112.9% higher than the industry average of 0.61x. Moreover, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 3.99%, 2.41%, and 1.17% compare to the industry averages of 1.04%, 1.81%, and 0.49%, respectively.
For the third quarter that ended April 1, 2023, KTCC’s net sales increased 18.9% year-over-year to $164.55 million. Its operating income rose 84% from the year-ago value to $5.13 million. Also, the company’s net income increased 96.2% from the prior year’s period to $1.98 million, while its EPS came in at $0.18, up 100.5% year-over-year.
Shares of KTCC have gained 38.9% year-to-date to close the last trading session at $6.07.
KTCC’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
KTCC has an A grade for Growth and a B for Value, Momentum, and Sentiment. Within the same industry, the stock is ranked #14 out of 79 stocks.
Click here to access additional KTCC ratings for Stability and Quality.
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NABL shares were trading at $13.49 per share on Thursday morning, down $0.29 (-2.10%). Year-to-date, NABL has gained 31.23%, versus a 8.02% 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.
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