The ongoing digital transformation and a continuation of remote working partly because of a resurgence of COVID-19 cases are rekindling investor interest in the tech industry. This is evidenced by the iShares U.S. Technology ETF’s (IYW) 4% returns versus SPDR S&P 500 Trust ETF’s (SPY) 2.9% gains over the past month.
However, because concerns over rising inflation, a slowing global economic recovery, and geopolitical tensions are fostering volatility in the stock market, many quality tech stocks, which are currently trading at high prices, could witness a correction in the near term.
So, we think it could be wise to bet on low-priced tech stocks Lantronix, Inc. (LTRX), NetSol Technologies, Inc. (NTWK), and Evolving Systems, Inc. (EVOL) that have the financial wherewithal to cash in on the industry tailwinds. Each of these stocks is rated B (Buy) in our proprietary POWR Ratings system.
Lantronix, Inc. (LTRX)
LTRX provides Software-As-a-Service (SaaS), engineering services, connectivity services, and hardware for edge computing, the Internet of Things (IoT), and remote environment management (REM) worldwide. The Irvine, Calif., company offers its products through value-added resellers, systems integrators, distributors, online retailers and OEMs, and an e-commerce site for direct sales. It has a $137.54 million market capitalization.
LTRX acquired Transition Networks and Net2Edge, which comprises the Electronics and Software reportable business segment of Communications Systems, Inc. (JCS), on August 2, 2021. The acquisition adds complementary switching, Power over Ethernet (PoE), and media conversion and adapter products to LTRX’s Industrial IoT connectivity portfolio that targets Smart City infrastructure with significant long-term revenue synergy opportunities. LTRX expects revenues from the combined company to total more than $100 million on an annual basis.
On July 15, LTRX announced enhancements in True Zero-Touch Automation for provisioning remotely deployed IoT devices in its ConsoleFlow cloud-based Software-as-a-Service (SaaS) platform. True Zero-Touch will simplify the onboarding logistics of new devices, virtually eliminating on-site visits and reducing operational costs for the customers. The company is looking forward to seeing high demand from the markets in the near term.
LTRX’s net revenue for its fiscal third quarter, ended March 31, 2021, increased 3.2% year-over-year to $17.11 million. The company’s gross profit came in at $7.72 million, up 10.3% from the prior-year period. Its non-GAAP operating income has been reported at $5.57 million for the quarter, representing a 215.4% rise from the prior-year period. LTRX’s non-GAAP net income increased 151.8% year-over-year to $1.54 million. Its non-GAAP EPS increased 150% year-over-year to $0.05. The company had $8.28 million in cash and cash equivalents as of March 31, 2021.
A $0.07 consensus EPS estimate for the current quarter, ending September 30, 2021, represents a 40% improvement year-over-year. LTRX surpassed consensus EPS estimates in three of the trailing four quarters. The $23.40 million consensus revenue estimate for the current quarter represents a 36.5% gain from the prior-year period. Analysts expect the stock’s EPS to grow at a 20% rate per annum over the next five years.
The stock has gained 6% over the past nine months and 7.2% year-to-date. It closed yesterday’s trading session at $4.68, 17.2% higher than its 52-week low of $4.06.
LTRX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Sentiment, and a B grade for Growth. Click here to see the additional ratings for LTRX’s Value, Quality, Stability, and Momentum. LTRX is ranked #20 of 45 stocks in the B-rated Technology - Hardware industry.
NetSol Technologies, Inc. (NTWK)
With a $47.94 million market capitalization, Calabasa, Calif-based NTWK is a provider of information technology (IT) and enterprise software solutions to the automobile financing and leasing, banking, and financial services industries worldwide. The company licenses, customizes, enhances, and maintains its suite of financial applications under the NFS Ascent brand.
On August 17, 2021, NTWK agreed with Motorcycle Group to deploy the cloud-based version of its flagship NFS Ascent platform across the customer’s entire operations. By opting for the cloud-deployed and hosted Ascent platform, Motorcycle Group will be able to run its retail leasing and loaning operations seamlessly and with the operational and pricing flexibility to scale on demand. The agreement validates Ascent’s capabilities across the entire leasing and loan contract lifecycle.
On August 09, MINI USA and MINI Financial Services selected NTWK subsidiary Otoz to enable digital retail for MINI dealerships and consumers. Backed by NTWK’s global expertise in automotive marketplaces, Otoz launched an automotive retail platform, MINI Anywhere, to empower OEM’s marketing strategies and create a new, automated sales channel to provide an authentic, end-to-end car shopping experience for dealerships and lenders. Both developments provide a fresh entry for NTWK into the U.S. markets.
For the fiscal third quarter, ended March 31, 2021, NTWK’s total net revenues increased 1.9% year-over-year to $13.78 million. The company’s gross profit has been reported at $6.43 million, up 6.7% from the prior-year period. Its income from operations came in at $462.22 million, compared to a $376.06 million loss in the prior-year period. As of March 31, 2021, the company had $30.60 million in cash and cash equivalents.
NTWK surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 48.3% over the past nine months and 1.9% over the past month. It ended yesterday’s trading session at $4.31, 88.1% higher than its 52-week low of $2.35.
It’s no surprise that NTWK has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Value, and a B grade for Quality, Momentum, and Sentiment.
Click here to see the additional ratings for NTWK’s Growth and Stability. Of the 156 stocks in the Software - Application industry, NTWK is ranked #18.
Click here to check out our Software Industry Report for 2021
Evolving Systems, Inc. (EVOL)
EVOL provides real-time digital engagement solutions and services to the wireless carrier and consumer financial service markets internationally. The company offers customer retention and loyalty solutions that reduce churn, extend the customer lifecycle, and generate revenue from existing subscribers. It also provides marketing advisory, IT, managed services, and customer value management solutions. The Englewood, Colo., company has a $26.11 million market capitalization.
In an announcement dated June 15, 2021, Cellcard Cambodia said it was upgrading to EVOL’s new Evolution platform to enhance its Cellcard Club loyalty program to drive more personalized and relevant offers to subscribers through various digital media in real-time. Cellcard’s new deployment will reduce churn, drive acquisition and enhance its program’s appeal to the critical Cambodian youth market by delivering a program that will elevate its digital lifestyle brand to engage customers actively. As more subscribers get enrolled, EVOL expects to generate good returns in the coming months.
EVOL’s revenue for its fiscal second quarter, ended June 30, 2021, increased 10.5% year-over-year to $6.99 million. The company’s income from operations has been reported at $350,000, representing a 20.4% year-over-year improvement. EVOL’s net income was $953,000, versus a $48,000 loss in the prior-year period. Its EPS came in at $0.08, compared to zero EPS in the year-ago period. As of June 30, 2021, the company had $4.90 million in cash and cash equivalents.
EVOL has gained 88.5% over the past year and 22.4% over the past three months. It closed yesterday’s trading session at $2.13.
EVOL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. In addition, the stock has an A grade for Quality and Value.
We also have graded EVOL for Growth, Sentiment, Momentum, and Stability. Click here to access all EVOL’s ratings. Of the 156 stocks in the Software - Application industry, EVOL is ranked #20.
Click here to check out our Software Industry Report for 2021
LTRX shares were trading at $4.78 per share on Wednesday afternoon, up $0.10 (+2.14%). Year-to-date, LTRX has gained 7.66%, versus a 19.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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