Newer innovations and increased spending worldwide could serve as an enduring tailwind for the technology industry. Therefore, let us look into tech stocks Jabil Inc. (JBL), PC Connection, Inc. (CNXN), and Mastech Digital, Inc. (MHH) now.
Technology has tremendously evolved in the past few decades, transforming our lifestyle and helping us grow with it. Every field owes its advancement to technological advancements, which indicates the significance of technology in every aspect of our lives.
The tech industry bore the brunt of several macroeconomic and geopolitical challenges. However, in the first quarter of 2023, the tech sector’s impressive recovery was driven by stronger-than-anticipated earnings and cost-cutting measures from major companies.
Moving ahead, even though experts are cautiously optimistic regarding the tech industry amid economic uncertainties, the industry is well-placed to showcase resilience, thanks to technological advancements such as AI, machine learning, AR, VR, blockchain, and cloud computing.
In today’s globalized world, digital transformation is an essential tool for businesses to remain resilient and competitive. The global digital transformation market is projected to rise from $2.27 trillion in 2023 to $8.92 trillion by 2030 at a CAGR of 21.6% between 2021 and 2030.
Furthermore, the tech-heavy Nasdaq Composite gained 26.5% year-to-date, surpassing the broader market and substantiating investors’ confidence. Therefore, quality tech stocks JBL, CNXN, and MHH could be wise portfolio additions now to capitalize on the industry tailwinds.
Jabil Inc. (JBL)
JBL offers products and services for manufacturing all over the world. The company operates in two broad segments: Electronics Manufacturing Services and Diversified Manufacturing Services.
On April 20, JBL announced that its Board of Directors had declared a quarterly dividend of $0.08 per share of common stock paid to the shareholders on June 2, 2023. JBL has paid consecutive quarterly dividends on its common shares since May 15, 2006.
JBL pays an annual dividend of $0.32, which translates to a 0.34% yield on the current share price. Its four-year average dividend yield is 0.71%.
On April 11, JBL announced the pricing of its offering of $300 million aggregate principal amount of its 5.45% senior notes due 2029 on April 10, 2023.
JBL intends to use the net proceeds from the offering for general corporate purposes, including, together with available cash, the repayment of $300 million aggregate principal amount 4.9% senior notes due 2023 at or prior to maturity.
JBL’s forward Price/Sales of 0.36x is 87% lower than the industry average of 2.76x. Its forward EV/EBIT multiple of 8.62 is 53.1% lower than the industry average of 18.38.
JBL’s trailing-12-month ROCE and ROTC of 38.44% and 4.92 are significantly higher than the industry averages of 0.50% and 0.02%, respectively. Its trailing-12-month cash from operations of $2.03 billion is significantly higher than the industry average of $55.56 million.
JBL’s net revenue for the fiscal second quarter ended February 28, 2023, increased 7.7% year-over-year to $8.13 billion. For the same quarter, its gross profit stood at $661 million, up 8.5% year-over-year. The company’s non-GAAP core operating income increased 13.7% over the year-ago quarter to $391 million.
Its non-GAAP core earnings increased 4.1% year-over-year to $256 million. In addition, its non-GAAP core earnings per share came in at $1.88, representing an 11.9% increase over the prior-year quarter.
For the fiscal year 2023, JBL expects to deliver a 4.9% core operating margin on $34.5 billion in revenue.
Analysts expect JBL’s revenue to come in at $8.19 billion for the fiscal third quarter (ended May 2023). Its EPS is estimated to rise 8.4% year-over-year to $1.86 for the same quarter. It surpassed EPS and revenue estimates in all four trailing quarters, which is impressive.
Over the past six months, the stock has gained 31.3% to close the last trading session at $94.18. Moreover, it has also gained 20.2% over the past month.
JBL’s POWR Ratings reflect this promising outlook. It has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Momentum and a B for Quality. Within the Technology – Services industry, it is ranked #11 out of 82 stocks.
To see the additional POWR Ratings for Growth, Value, Sentiment, and Stability for JBL, click here.
PC Connection, Inc. (CNXN)
CNXN provides various IT solutions and offers services for designing, configuring, and implementing them. The company operates through three segments: Business Solutions; Enterprise Solutions; and Public Sector Solutions.
The company announced that its board of directors had declared a quarterly dividend of $0.08 per share on its common stock, which was paid to shareholders on June 2, 2023. Its annual dividend translates to a 0.68% yield on the current share price. Its four-year average dividend yield is 1.14%.
Recently, the company was named HP U.S. Print Hardware National Solution Provider (NSP) Partner of the Year at the HP AMPLIFY partner conference for its outstanding performance and leading growth.
CNXN’s forward Price/Sales of 0.39x is 85.8% lower than the industry average of 2.76x. Its forward EV/EBIT multiple of 9.88 is 46.3% lower than the industry average of 18.38.
CNXN’s trailing-12-month ROCE and ROTA of 11.02% and 7.30% are significantly higher than the industry averages of 0.50% and 0.02%, respectively. Moreover, its trailing-12-month asset turnover ratio of 2.76x is 354.7% higher than the industry average of 0.61x.
CNXN’s revenue amounted to $727.55 million in the fiscal first quarter that ended on March 31, 2023, while its gross margin grew to 16.8% from 16.3% in the year-ago quarter.
The company reported a non-GAAP net income and adjusted EBITDA of $14.85 million and $25.25 million, respectively. Its adjusted earnings per share came in at $0.56 for the same quarter. In addition, its cash and cash equivalents of $134.81 million as of March 31, 2023, increased 9.7% from $122.93 million as of December 31, 2022.
Street expects CNXN’s revenue and EPS to increase 10.9% and 27.5% year-over-year to $812.11 million and $0.91, respectively, in the fiscal fourth quarter (ending December 2023).
Over the past three months, the stock has gained 7.2% to close the last trading session at $45.85. Moreover, over the past month, the stock gained 17.9%.
CNXN’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
It also has a B grade for Momentum, Stability, and Quality. Within the same industry, it is ranked #22.
Click here to see the additional ratings for CNXN (Growth, Value, and Sentiment).
Mastech Digital, Inc. (MHH)
MHH engages in the provision of digital transformation information technology services to large, medium-sized, and small companies in the United States. It operates through the following segments: Data & Analytics Services; and Information Technology (IT) Staffing Services.
On May 31, MHH announced its entry into the engineering staffing services business. The company now aims to become a trusted partner for providing engineering talent nationwide. This would bring top engineering talent to businesses seeking highly skilled engineering professionals to drive innovation and growth.
The company recently launched a self-service staffing portal for clients to select candidates in a unique digital shopping cart style.
MHH’s forward Price/Sales of 0.55x is 59.1% lower than the industry average of 1.34x. Its forward EV/Sales multiple of 0.52 is 68.3% lower than the industry average of 1.63.
The stock’s trailing-12-month ROTC and ROTA of 7.29% and 6.10% are 4.7% and 20.3% higher than the industry averages of 6.97% and 5.07%, respectively. Moreover, the company’s trailing-12-month asset turnover ratio of 2.11x is 163.8% higher than the 0.80x industry average.
For the fiscal first quarter that ended March 31, 2023, MHH’s net revenue amounted to $55.06 million, while its gross profit stood at $13.48 million. Its non-GAAP net income and non-GAAP earnings per share stood at $1.40 million and $0.12, respectively.
As of March 31, 2023, the company’s cash and cash equivalents came in at $9.10 million, compared to $7.06 million as of December 31, 2022, while its total current assets stood at $54.53 million as of March 31, 2023, compared to $53.17 million as of December 31, 2022.
Analysts expect MHH’s revenue to increase 7.5% year-over-year to $240.02 million for the fiscal year 2024. The company’s EPS for the year ending December 2024 is expected to improve by 96.2% from the prior year to $1.28.
The stock has gained 9.7% over the past month to close the last trading session at $10.06.
MHH’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.
MHH has a B grade for Value and Quality. It is ranked #12 within the same industry.
In addition to the POWR Ratings highlighted above, one can see MHH ratings for Growth, Momentum, Stability, and Sentiment here.
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JBL shares were trading at $94.91 per share on Friday morning, up $0.73 (+0.78%). Year-to-date, JBL has gained 39.44%, versus a 12.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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