Why You Should Consider Adding These 3 Buy-Rated Small-Cap Tech Stocks to Your Portfolio

Rising input costs, supply-chain disruption, and labor shortages have kept the tech industry under pressure. In addition, the 10-year Treasury yield rose to 1.679% following President Joe Biden’s re-nomination of Jerome Powell as Federal Reserve chairman. However, a solid third-quarter earnings season and the resurgence of COVID-19 cases have led to renewed investor interest in tech stocks. This is evidenced by the Technology Select Sector SPDR ETF’s (XLK) 6.5% returns over the past month, versus the SPDR S&P 500 Trust ETF’s (SPY) 3.2% gains.

The ongoing digital transformation and increasing use of cloud computing, artificial intelligence, and other advanced technologies should keep driving the technology industry’s growth. According to GoRemotely, the tech industry is expected to hit a $5 trillion market value by year’s end.

And given the continuing low-interest-rate environment, we think it could be wise to bet on quality small-cap tech stocks Gilat Satellite Networks Ltd. (GILT), Benefitfocus, Inc. (BNFT), and CyberOptics Corporation (CYBE). These stocks are rated B (Buy) in our POWR Ratings system.

Gilat Satellite Networks Ltd. (GILT)

Based in Petah Tikva, Israel, GILT provides satellite-based broadband communication solutions & services worldwide. It has three segments: Fixed Networks; Mobility Solutions; and Terrestrial Infrastructure Projects. It has a market capitalization of $394.64 million.

On October 18, 2021, GILT announced the expansion of the 4G network of a Tier-1 Mobile Network Operator in North America for disaster recovery and ongoing operational business needs. Michal Aharonov, Chief Commercial Officer at GILT, said, “Gilat is proud to support Mobile Network Operators in the U.S. and worldwide in their mission to deal with critical situations when they happen, as well as to provide them with an assortment of additional services.”

GILT’s revenues increased 33.9% year-over-year to $49.91 million for its fiscal third quarter, ended September 30, 2021. The company’s gross profit came in at $17.61 million, representing an 86.4% year-over-year rise. Its non-GAAP net income came in at $712,000, compared to a $2.57 million loss in the year-ago period. Its adjusted EBITDA increased 614.4% year-over-year to $4.01 million.

For its fiscal year 2022, analysts expect GILT’s revenue to be $258.71 million, representing a 20.1% year-over-year rise. The company’s EPS is expected to increase 500% year-over-year to $0.16 in its fiscal year 2022. Over the past year, the stock has gained 21.6% in price to close yesterday’s trading session at $6.98.

GILT’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

Also, the stock has an A grade for Value and Sentiment, and a B grade for Quality. Within the Technology - Communication/Networking industry, it is ranked #13  of 55 stocks. Click here to see the additional POWR Ratings for Growth, Momentum, and Stability for GILT.

Benefitfocus, Inc. (BNFT)

With a market capitalization of $347.01 million, BNFT in Charleston, S.C., provides cloud-based benefits management technology solutions for employers and health plans in the USA. Its segments comprise Benefitplace; Health Insights; ACA Management & Reporting; Billing & Payments; COBRA Administration.

On November 17, 2021, BNFT announced its acquisition of Tango Health, an innovative software, and services company that offers Affordable Care Act compliance and benefits decision-support solutions. Matt Levin, President and CEO of BNFT, said, “Consistent with our strategy to strengthen the foundation of our core offerings, the acquisition of Tango Health enables us to offer our customers an industry-leading ACA compliance and reporting solution to complement their overall benefits strategy.”

For its fiscal third quarter, ended September 30, 2021, BNFT’s Platform revenue increased 9.8% year-over-year to $6.16 million. Its total software services came in at $50.95 million, compared to $50.59 million in the previous period. The company’s total liabilities were $254.43 million for September 30, 2021, compared to $331.77 million for the period ended December 31, 2020.

BNFT’s EPS is expected to grow at a 13.8% rate over the next year and 20% per annum over the next five years. Also, it surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 3.2% in price since hitting its 52-week low of $10.06 on November 23, 2021, to close yesterday’s trading session at $10.38.

It is no surprise that BNFT has an overall B rating, equating to a Buy in our proprietary rating system. In addition, it has a B grade for Value.

BNFT is ranked #14 of 167 in the Software - Application industry. Click here to see BNFT’s ratings for Sentiment, Growth, Momentum, Quality, and Stability also. 

Click here to check out our Software Industry Report for 2021

CyberOptics Corporation (CYBE)

CYBE in Minneapolis, Minn., designs, develops, and manufactures high-precision sensing technology solutions and system products for inspection and metrology worldwide. It has a market capitalization of $325.34 million.

On October 27, 2021, Dr. Subodh Kulkarni, President, and CEO, said, “Our line-up of 3D Multi-Reflection Suppression based sensing and inspection system products and WaferSense semiconductor sensors have positioned CyberOptics to report record sales and operating earnings for full-year 2021. These products have enabled us to gain traction in our targeted surface mount technology and semiconductor capital equipment markets. We believe this strength will persist for some time, making us optimistic about CyberOptics’ fourth-quarter performance and outlook for 2022.”

CYBE’s revenue increased 33.3% year-over-year to $27.76 million for its fiscal third quarter, ended September 30, 2021. Its net income came in at $4.8 million, representing a 166.7% year-over-year rise. And its EPS came in at $0.63, up 162.5% year-over-year.

Analysts expect CYBE’s revenue to grow 30.7% year-over-year to $91.61 million in its fiscal 2021. In addition, the company’s EPS is expected to increase 92.2% to $1.48 in the current year. Also, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 71.3% in price to close yesterday’s trading session at $44.23.

CYBE’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.

In addition, it has a B grade for Sentiment and Momentum. It is ranked #17 of 52 stocks in the Technology - Hardware industry. Click here to see the additional POWR Ratings for CYBE (Growth, Value, Stability, and Quality).

GILT shares were trading at $7.02 per share on Wednesday morning, up $0.04 (+0.57%). Year-to-date, GILT has gained 14.73%, versus a 26.54% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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