Companies are investing abundantly in digitization, automation, and emerging technologies like artificial intelligence, fuelling the tech market growth. Given the favorable industry trends, quality tech stocks N-able, Inc. (NABL), TTM Technologies, Inc. (TTMI), and  TransAct Technologies Incorporated (TACT) might generate significant returns in the near term.

The rise in IT expenditures, with the widespread adoption of software-as-a-service (SaaS) and the growing availability of cloud-based solutions, is driving market expansion. Businesses use IT services for various purposes, from standard chores like handling employee records to complex corporate processes like supply chain and operations management.

The global IT services market is expected to grow at a CAGR of 9.7% until 2030.

Gartner predicts global IT spending will reach $5.1 trillion in 2024, reflecting an 8% year-over-year increase. Global spending on public cloud services is forecast to increase by 20.4% in 2024, driven by cloud vendor price increases and increased utilization.

Moreover, the IT hardware market is projected to grow at a CAGR of 7.9% to reach $177.11 billion by 2028. Advanced technologies like artificial intelligence, machine learning, and the Internet of Things drive the demand for specialized hardware to meet the complex processing and data storage requirements.

With these favorable trends in mind, let’s delve into the fundamentals of the three best stock picks.

N-able, Inc. (NABL)

NABL provides cloud-based software solutions for managed service providers. The company’s solutions enable MSPs to support digital transformation and growth within small and medium-sized enterprises.

On November 20, 2023, NABL announced Cove Data Protection for Microsoft 365, offering an additional layer of protection against data loss for Microsoft Teams, including backup and recovery of teams, members, settings, and files.

NABL’s trailing-12-month gross profit margin of 84.40% is 73.4% higher than the industry average of 48.67%, while its trailing-12-month levered FCF margin of 14.87% is 80.6% higher than the industry average of 8.24%.

NABL’s revenue for the fiscal third quarter ended September 30, 2023, rose 15% year-over-year to $107.57 million. Its gross profit rose 15% year-over-year to $90.21 million. Its net income increased significantly year-over-year to $6.01 million, and net income per share stood at $0.03.

Analysts expect NABL’s revenue for the fourth quarter ending December 31, 2023, to increase 11.8% year-over-year to $107.04 million. Its EPS is expected to be $0.08 for the same quarter. Also, the company topped the consensus revenue and EPS estimates in each of the four trailing quarters, which is impressive.

The stock has gained 15.9% year-to-date to close the last trading session at $11.91.

NABL’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The stock has a B grade in Growth, Sentiment, and Stability. It is ranked #10 out of 75 stocks in the Technology - Services industry.

Click here to see the other ratings of NABL (Value, Momentum, and Quality).

TTM Technologies, Inc. (TTMI)

TTMI is a global manufacturer and seller of engineered systems, radio frequency components, and printed circuit boards (PCB). Operating in PCB and RF&S Components segments, the company offers a wide range of products, including HDI PCBs, flexible PCBs, IC substrates, and advanced ceramic RF components.

TTMI’s trailing-12-month EBITDA margin of 11.69% is 28.9% higher than the industry average of 9.07%. Its 6.17% trailing-12-month CAPEX /Sales is 164.5% higher than the 2.33% industry average.

On November 1, TTMI selected New York State for a new high-tech manufacturing facility in Syracuse, focusing on producing ultra-high-density interconnect (HDI) PCBs for national security.

The project aims to bring around 400 jobs, strengthen the microelectronics ecosystem, and enhance domestic capacity. The facility is anticipated to be the most technological advanced PCB manufacturing site in North America, with groundbreaking expected in the first half of 2024 and an estimated initial investment of $100 to $130 million.

During the third quarter ended October 2, 2023, TTMI’s net sales amounted to $572.58 million. The company generated non-GAAP net income and EPS of $44.88 million and $0.43, respectively. Also, its adjusted EBITDA and free cash flow amounted to $84.08 million and $25.19 million, respectively.

For the fourth quarter of 2023, TTMI anticipates revenues to fall within the range of $550 million to $590 million. Additionally, the non-GAAP net income is expected to be in the range of $0.34 to $0.40 per diluted share.

Street expects TTMI’s revenue and EPS to grow 3.5% and 59.7% year-over-year to $563.23 million and $0.29 for the first quarter ending March 2024. The company has surpassed the EPS estimates in three of the trailing four quarters.

Shares of TTMI increased 29.7% over the past month to close the last trading session at $15.01.

TTMI’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.

It has a B grade for Growth, Momentum, and Sentiment. Within the B-rated Technology - Electronics industry, it is ranked #7 out of 41 stocks.

Beyond what is stated above, we’ve also rated TTMI for Quality, Value, and Stability. Get all TTMI ratings here.

TransAct Technologies Incorporated (TACT)

TACT designs, develops, and markets transaction-based and specialty printers and terminals. The company offers thermal printers and terminals to generate labels, coupons, and transaction records. The company also provides consumables products, as well as replacement parts and accessories, maintenance and repair services, and refurbished printers.

In terms of the trailing-12-month net income margin, TACT’s 6.56% is 223.4% higher than the 2.03% industry average. Likewise, its 8.69% trailing-12-month EBIT margin is 85.3% higher than the industry average of 4.69%.

For the third quarter ended September 30, 2023, TACT’s net sales amounted to $17.19 million, while its gross profit increased 8.8% year-over-year to $8.92 million. Its adjusted operating income increased 207.8% over the prior year quarter to $1.19 million. Its adjusted net income rose 71.6% year-over-year to $906 million. Also, its adjusted EPS came in at $0.09, representing an increase of 80% year-over-year.

TACT’s revenue for fiscal 2023 is expected to increase 25.5% year-over-year to $72.97 million. It surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.

Over the past year, the stock has surged 6.3% to close the last trading session at $6.75.

It’s no surprise that TACT has an overall rating of B, which equates to Buy in our proprietary rating system.

It has an A grade for Sentiment and Value and a B in Quality. Within the B-rated Technology - Hardware industry, it is ranked #7 out of 37 stocks.

In addition to the POWR Ratings stated above, one can access TACT’s ratings for Momentum, Growth, and Stability 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.

2024 Stock Market Outlook >

NABL shares were trading at $12.08 per share on Friday morning, up $0.17 (+1.43%). Year-to-date, NABL has gained 17.51%, versus a 20.75% rise in the benchmark S&P 500 index during the same period.

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.

More...