With promising growth prospects of the tech industry, fueled by the widespread adoption of advanced technologies amid rapid digitalization across various sectors, it seems wise to load up on undervalued, fundamentally sound tech stocks Brother Industries, Ltd. (BRTHY), Vishay Intertechnology, Inc. (VSH), and EchoStar Corporation (SATS) for potential gains. Let’s discuss this in detail.
Modern technology, encompassing smart devices, advanced computers, and intricate engineering equipment, has integrated nearly every aspect of our lives. The technology industry’s colossal magnitude and rapid digital transformation across several industries have cemented its position as a dominating player in the global economy.
Companies are heavily investing in technology and its management services. For instance, the growing corporate shift toward cloud-based software. Cloud computing has enabled users to access system features and files without the need for local storage, accommodating the exponential growth in data usage during the digital era.
Furthermore, the vast popularity and adoption of several advanced technologies among individuals and enterprises, such as Artificial Intelligence (AI), the Internet of Things (IoT), AR&VR, 5G, and machine learning, propel the tech industry’s growth.
Despite ongoing economic turbulence, tech spending will likely increase worldwide in 2023. Gartner forecasts global IT spending to reach $4.60 trillion this year, indicating a 5.5% increase from the previous year.
Meanwhile, according to ReportLinker, the global information technology market is expected to reach $12 trillion by 2027, growing at a 7.9% CAGR.
Moreover, the iShares Global Tech ETF’s (IXN) impressive 25.2% returns over the past six months illustrate investors’ keen interest in tech stocks.
Given the industry’s bright growth prospects, investing in undervalued tech stocks BRTHY, VSH, and SATS could be wise for significant returns.
Brother Industries, Ltd. (BRTHY)
Headquartered in Nagoya, Japan, BRTHY manufactures and sells communication and printing equipment. Its segments include Printing & Solutions; Machinery; Domino; Nissei; Personal & Home; and Network & Contents. The company’s portfolio includes printers, sewing machines, coding equipment, gear motors, karaoke systems, and more.
On May 22, BRTHY inaugurated its second Technology Center in Gurugram, Haryana State, India, through its subsidiary, BROTHER MACHINERY INDIA PRIVATE LTD. The center aims to enhance service support in Northern India, exhibit BRTHY’s machine tools, and demonstrate parts machining to promote their high productivity among customers.
On February 7, the company revealed its plans to construct a machine tool production plant in Southern India, near Bengaluru. With a population of more than 1.4 billion, India offers immense market potential, particularly in the automotive and motorcycle sectors. BRTHY intends to leverage this opportunity to expand its operations and increase profitability.
In terms of forward EV/Sales, BRTHY is trading at 0.56x, 80.8% lower than the industry average of 2.92x. Its forward EV/EBITDA multiple of 4.19 is 70.7% lower than the industry average of 14.32. In addition, the stock’s forward Price/Sales of 0.67x is 75.4% lower than the industry average of 2.73x.
BRTHY’s revenue during the fiscal year that ended March 31, 2023, increased 14.7% year-over-year to ¥815.27 billion ($5.83 billion). Its gross profit rose 4% from the year-ago value to ¥319.59 billion ($2.29 billion).
In addition, as of March 31, 2023, the company’s current assets came in at ¥511.75 billion ($3.66 billion), compared to ¥476.75 billion ($3.41 billion) as of March 31, 2022. Its total assets amounted to ¥850.49 billion ($6.08 billion), compared to ¥ 811.15 billion ($5.80 billion) as of March 31, 2022.
The consensus revenue estimate of $5.90 billion for the fiscal year (ending March 2024) reflects a 72.1% year-over-year improvement. Also, the consensus revenue estimate of $5.97 billion for the fiscal year 2025 indicates a 1.3% rise year-over-year. Moreover, the company topped the consensus revenue estimates in all four trailing quarters, which is impressive.
Shares of BRTHY marginally gained intraday to close the last trading session at $24.49.
BRTHY’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.
BRTHY has an A grade for Stability and a B for Value and Quality. It is ranked #6 in the 41-stock Technology - Electronics industry.
In addition to the POWR Ratings I’ve just highlighted, you can see BRTHY’s ratings for Growth, Momentum, and Sentiment here.
Vishay Intertechnology, Inc. (VSH)
VSH produces and sells semiconductors and electronic components. Its segments include Metal Oxide Semiconductor Field Effect Transistors (MOSFETs); Diodes; Optoelectronic Components; Resistors; Inductors; and Capacitors. The company serves the industrial, automotive, telecommunications, military, and aerospace sectors.
On June 7, VSH introduced the VOMDA1271, an automotive-grade photovoltaic MOSFET driver. It is the first of its kind to incorporate an integrated turn-off circuit within the compact SOP-4 package. With superior performance, high switching speeds, and increased design flexibility, this launch strengthens VSH Semiconductors’ position in the market.
On May 30, VSH unveiled a novel thick film power resistor. The resistor package offers an integrated AEC-Q200-tested NTC thermistor, simplifying designs, conserving board space, and facilitating efficient production installation. Such innovative launches are expected to expand VSH’s product offerings and attract a broader customer base.
In terms of forward non-GAAP P/E, VSH is trading at 9.86x, 54.7% lower than the industry average of 21.77x. Additionally, the stock’s forward EV/Sales and forward EV/EBITDA of 0.96x and 5.07x are 67.3% and 64.6% lower than the industry averages of 2.92x and 14.32x, respectively.
VSH’s net revenues increased 2% year-over-year to $871.05 million in the first quarter that ended April 1, 2023. Its adjusted EBITDA grew 10.3% from the year-ago value to $199.25 million. Moreover, the company’s adjusted net earnings rose 7.9% from the prior-year period to $111.78 million, while its adjusted EPS increased 11.3% year-over-year to $0.79.
Analysts expect VSH’s revenue for the fiscal year ending December 2023 to increase marginally year-over-year to $3.52 billion. In addition, the consensus revenue estimate of $3.56 billion for the fiscal year 2024 reflects a 1.2% growth year-over-year. The stock has gained 26.5% over the past month and 32.3% over the past year to close the last trading session at $24.22.
VSH’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
VSH has an A grade for Value and a B for Momentum. It is ranked #4 out of 41 stocks within the Technology – Electronics industry.
Click here to access additional VSH ratings (Quality, Stability, Growth, and Sentiment).
EchoStar Corporation (SATS)
SATS offers networking technologies and services. Its segments include Hughes and EchoStar Satellite Services (ESS). Hughes provides broadband network technologies and communications solutions to government and enterprise customers. ESS offers satellite services to U.S. government service providers, internet service providers, and private enterprises.
On June 5, Hughes Network Systems, a SATS company, and OneWeb, a Low Earth Orbit (LEO) satellite communications company, partnered to offer LEO connectivity services to the global airline market, providing passengers with in-flight Wi-Fi comparable to their home or office experience.
Such strategic alliance expands the company's reach and holds promising potential for its future growth.
On April 17, Hughes revolutionized defense network operations by launching its Smart Network Edge software. By leveraging software-defined networking, the company enables secure network interoperability and resiliency at scale, positioning itself as a leading provider of advanced solutions for the Department of Defense and fostering long-term growth opportunities.
In terms of forward P/E, SATS is trading at 17.07x, 4.9% lower than the industry average of 17.94x. Also, the stock’s forward EV/Sales and forward EV/EBITDA of 0.81x and 2.76x is 55.2% and 67.6% lower than the respective industry averages of 1.80x and 8.51x.
For the first quarter that ended March 31, 2023, SATS’ revenue from the EchoStar Satellite Services segment grew 34% year-over-year to $6 million. As of March 31, 2023, the company’s cash and cash equivalents stood at $920.11 million, compared to $704.54 million as of December 31, 2022.
Analysts expect SATS’ revenue to increase 6.6% year-over-year to $1.97 billion for the fiscal year (ending December 2024). Also, the company’s EPS is expected to grow 5% per annum over the next five years. Shares of SATS have gained 10.1% over the past month to close the last trading session at $17.35.
SATS’ robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
SATS has a B grade for Growth and Quality. It has ranked #7 within the same industry.
Click here to access additional SATS ratings for Stability, Growth, Sentiment, and Momentum.
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BRTHY shares were trading at $29.49 per share on Thursday morning, up $0.22 (+0.75%). Year-to-date, BRTHY has gained 0.14%, versus a 12.37% 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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