Driven by the growing use of emerging technologies, businesses invest in cutting-edge hardware solutions to stay efficient and competitive in today’s digital age.
Therefore, investors could consider buying fundamentally strong tech stocks such as Canon Inc. (CAJPY), Lantronix, Inc. (LTRX), and AstroNova, Inc. (ALOT). These stocks have been showing strong momentum lately and will likely maintain the same in the near term. Before exploring the fundamentals of these stocks, let’s discuss why the tech industry is well-positioned for growth.
The technology industry continually evolves, demanding innovative hardware solutions to ensure seamless software applications. Gartner expects worldwide IT spending to rise 8% year-over-year to $5.06 trillion in 2024. Spending on devices is expected to increase by 3.6% year-over-year to $687.94 billion this year.
Additionally, cutting-edge hardware is highly demanded to assure software performance and manage data-intensive tasks. This need has resulted in technological breakthroughs such as faster processors, larger storage capacities, and enhanced networking capabilities. The IT hardware market is projected to grow at a CAGR of 7.9% to reach $191.03 billion by 2029.
Investors’ interest in tech stocks is evident from the iShares Expanded Tech Sector ETF’s (IGM) 48.7% returns over the past year.
Considering these conducive trends, let’s examine the fundamentals of the three best Technology - Hardware stocks, starting with the third choice.
Stock #3: Canon Inc. (CAJPY)
Headquartered in Tokyo, Japan, CAJPY is a multinational company specializing in a diverse range of products, including office multifunction devices, printers, cameras, medical equipment, and lithography equipment. It operates through several business units, including Printing, Imaging, Medical, Industrial, and others.
In terms of the trailing-12-month net income margin, CAJPY’s 6.38% is 137.3% higher than the 2.69% industry average. Likewise, its 8.16% trailing-12-month Return on Common Equity is 157.8% higher than the 3.17% industry average. Additionally, its 4.67% trailing-12-month Return on Total Assets is 245.2% higher than the industry average of 1.35%.
For the fiscal first quarter, which ended March 31, 2024, CAJPY’s net sales increased marginally from the previous year’s quarter to ¥988.52 billion ($6.35 billion). The company’s net income and earnings per share grew 6.3% and 9.3% from a year-ago quarter to ¥59.95 billion ($385.23 million) and ¥60.67, respectively.
As of March 31, 2024, the company’s total assets amounted to ¥5.74 trillion ($36.89 billion), compared to ¥5.42 trillion ($34.81 billion) as of December 31, 2023.
CAJPY’s fiscal 2024 revenue is expected to increase 146.3% year-over-year to $27.83 billion. Over the past year, the stock has gained 25.1% to close the last trading session at $27.66.
CAJPY’s stock is trading above its 100-day and 200-day moving averages of $27.54 and $26.16, respectively, indicating an uptrend.
CAJPY’s POWR Ratings reflect this promising outlook. It 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.
CAJPY has an A grade for Momentum and a B for Value, Stability, and Quality. Within the B-rated Technology - Hardware industry, it is ranked #7 out of 37 stocks. To see CAJPY’s Growth and Sentiment ratings, click here.
Stock #2: Lantronix, Inc. (LTRX)
LTRX offers solutions for video surveillance, infotainment systems, and intelligent substations infrastructure internationally. The company’s IoT products include IoT System Solutions, Embedded IoT Modules, and Software and Engineering Services. It also offers telematics devices, which provide power-efficient products.
LTRX’s trailing-12-month levered FCF margin of 16.80% is 78.7% higher than the industry average of 9.40%. Its trailing-12-month asset turnover ratio of 0.92x is 50.5% higher than the industry average of 0.61x.
During the fiscal second quarter ended on December 31, 2023, LTRX’s net revenue increased 17.5% year-over-year to $37.04 million. Its gross profit rose 9% from the year-ago value to $15.03 million. In addition, the company’s non-GAAP net income amounted to $2.96 million and $0.08, representing increases of 115.4% and 100% year-over-year, respectively.
Analysts expect LTRX’s revenue and EPS for the quarter ended March 31, 2024, to increase 22% and 63.3% year-over-year to $40.22 million and $0.10, respectively. Over the past month, the stock has declined 9% to close the last trading session at $3.23.
It’s no surprise that LTRX has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
It has an A grade for Growth and Momentum and a B for Value, Sentiment, and Quality. It is ranked #3 in the same industry. Beyond what is stated above, we’ve also rated LTRX for Stability. Get all LTRX ratings here.
Stock #1: AstroNova, Inc. (ALOT)
ALOT designs, develops, manufactures, and distributes specialty printers alongside data acquisition and analysis systems internationally. The company operates through two segments: Product Identification (PI) and Test & Measurement (T&M). It offers its products under the QuickLabel, TrojanLabel, and GetLabels brands.
In terms of the trailing-12-month Return on Total Assets, ALOT’s 3.52% is 160.5% higher than the 1.35% industry average. Likewise, its 6.24% trailing-12-month Return on Total Capital is 174.8% higher than the 2.27% industry average. Also, its 10.56% trailing-12-month EBITDA margin is 10.2% higher than the 9.58% industry average.
ALOT’s net revenue for the fourth quarter, which ended January 31, 2024, came in at $39.59 million. Its non-GAAP gross profit grew 6.9% year-over-year to $14.50 million. The company’s non-GAAP operating income of $3.63 million indicates growth of 73.1% from the prior year’s quarter.
Furthermore, the company’s non-GAAP net income and non-GAAP EPS came in at $2.49 million and $0.33, up 82.8% and 83.3% year-over-year, respectively. Its adjusted EBITDA increased 40.5% year-over-year to $5.52 million.
Over the past six months, the stock has gained 42.4% to close the last trading session at $17.44. ALOT’s stock is trading above its 50-day and 200-day moving averages of $17.42 and $15.31, respectively, indicating an uptrend.
ALOT’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has a B grade for Growth, Value, Stability, and Sentiment. It is ranked first in the B-rated Technology – Hardware industry. Click here to see ALOT's Momentum and Quality ratings.
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.
CAJPY shares were trading at $26.04 per share on Thursday morning, down $1.62 (-5.86%). Year-to-date, CAJPY has gained 1.72%, versus a 5.43% 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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