Despite macroeconomic challenges, the tech industry is expected to grow due to increasing digital transformation, prominent advancements and rising demand. Given the industry’s solid growth prospects, investors could consider buying fundamentally sound tech stocks such as Nidec Corporation (NJDCY), Logitech International S.A. (LOGI), Iteris, Inc. (ITI) for solid returns.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the tech industry.
According to the most recent Gartner, Inc. prediction, worldwide IT spending would hit $4.7 trillion in 2023, a 4.3% increase from 2022, driven mostly by increased investments in cloud computing, artificial intelligence, and digital transformation programs across businesses.
Moreover, the global AI in hardware market is expected to reach $248.09 billion by 2030, growing at a CAGR of 24.5%. The artificial intelligence hardware market is expected to grow due to advancements in cloud computing and big data, with key components like networking storage and computers used in industries like telecom, banking, and IT.
In addition, the global IT hardware market is expected to grow at a 7.9% CAGR to $177.11 billion by 2028. Investors’ interest in tech stocks is evident from the iShares U.S. Technology ETF (IYW) 15.4% returns over the past six months.
In light of these encouraging trends, let’s look at the fundamentals of the three top-rated Technology - Hardware stocks, beginning with number 3.
Stock #3: Nidec Corporation (NJDCY)
Headquartered in Kyoto, Japan, NJDCY develops, manufactures, and sells motors, electronics and, optical components, and other related products internationally. The company’s products are used for applications in robotics, IoT products, automotive components, logistics, home appliances, information technology, housing equipment, and industrial machinery.
On October 5, NJDCY and Brazil’s Embraer (ERJ) received approval for a joint venture, Nidec Aerospace LLC. This transaction combines the complementary synergies and distinct areas of expertise of two world-class engineering conglomerates to develop Electric Propulsion Systems (EPS) for the aerospace sector.
This approval marks a significant milestone for the companies’ shared vision to advance and electrify how the world travels.
NJDCY’s trailing-12-month gross profit margin of 59.18% is 95.3% higher than the industry average of 30.31%. Its trailing-12-month CAPEX / Sales of 5.92% is 101.7% higher than the 2.94% industry average.
For the second quarter ended September 30, 2023, NJDCY’s net sales increased marginally year-over-year to ¥594.61 billion ($3.97 billion). Its operating profit grew 7.6% from the year-ago value to ¥55.63 billion ($371.07 million).
Additionally, the company’s profit attributable to owners to came in at ¥42.04 billion ($280.42 million), and its EPS came in at ¥73.16.
Analysts expect NJDCY’s revenue for the fiscal year ending March 2024 to increase 937.3% year-over-year to $15.41 billion. Its EPS for the current year is expected to increase 288.3% year-over-year to $0.56. The stock has lost 6% intraday to close the last trading session at $10.02.
NJDCY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
NJDCY also has an A grade for Stability and a B for Growth. It is ranked #15 out of 40 stocks in the B-rated Technology - Hardware industry. Click here for the additional POWR Ratings for Sentiment, Momentum, Value, and Quality for NJDCY.
Stock #2: Logitech International S.A. (LOGI)
Headquartered in Lausanne, Switzerland, LOGI designs, manufactures, and markets products that connect people to working, creating, gaming, and streaming worldwide. The company offers pointing devices, such as wireless mouse; corded and cordless keyboards, living room keyboards, and keyboard-and-mouse combinations; PC webcams; and keyboards for tablets and smartphones, as well as other accessories for mobile devices.
LOGI’s trailing-12-month ROTC of 12.37% is 406.4% higher than the industry average of 2.44%. Its trailing-12-month ROCE of 14.23% is significantly higher than the industry average of 1.16%.
LOGI’s non-GAAP gross profit increased marginally year-over-year to $444.07 million for the second quarter that ended September 30, 2023. Its non-GAAP operating income rose 17.1% from the year-ago value to $183.22 million. The company’s non-GAAP net income and earnings per share came in at $173.42 billion and $1.09, up 25.9% and 29.8% year-over-year, respectively.
The consensus revenue estimate of $4.35 billion for the year ending March 2025 represents a 5.6% increase year-over-year. Its EPS is expected to grow 25.4% year-over-year to $3.86 for the same period. It surpassed EPS estimates in three of four trailing quarters. LOGI’s shares have gained 69.2% over the past year to close the last trading session at $77.16.
It’s no surprise that LOGI has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Quality. It is ranked first in the #12 industry.
Beyond what is stated above, we’ve also rated LOGI for Momentum, Value, Sentiment, Growth and Stability. Get all LOGI ratings here.
Stock #1: Iteris, Inc. (ITI)
ITI provides intelligent transportation systems technology solutions worldwide. The company offers smart mobility infrastructure solutions, including traveler information systems, transportation performance measurement software, traffic analytics software, transportation operations software, transportation-related data sets, and advanced sensing devices, among other services.
On September 28, 2023, ITI introduced Vantage Next MaxTM, a new central control unit (CCU) that expands the supported sensors on the Vantage Next® platform from four to eight sensors per in-cabin CPU. This expansion is intended to improve traffic detection in larger or uniquely structured junctions while saving time and effort for traffic engineers and system integrators.
ITI’s trailing-12-month asset turnover ratio of 1.38x is 123.8% higher than the 0.62x industry average.
ITI’s total revenues for the fiscal first quarter (ended June 30, 2023) increased 29.3% year-over-year to $43.55 million, while its gross profit increased 65.4% year-over-year to $16.80 million. ITI’s adjusted EBITDA of $3.68 million for the same quarter compared to adjusted EBITDA of negative $2.45 million in the prior-year quarter.
Street expects ITI’s revenue to increase 10.9% year-over-year to $173.02 million for the year ending March 2024. Its EPS is expected to come in at $0.27 for the same period. Over the past year, the stock has gained 45.4% to close the last trading session at $4.07.
ITI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #5 in the same industry. It has a B grade for Growth and Sentiment. To see additional ITI’s ratings for Value, Stability, Momentum, and Quality, click 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.
NJDCY shares were trading at $9.66 per share on Wednesday afternoon, down $0.37 (-3.64%). Year-to-date, NJDCY has declined -24.12%, versus a 10.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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