The demand for advanced technologies is expected to remain elevated, driven by the need for efficiency and innovation across industries and a robust digital infrastructure.
Considering the industry’s solid growth prospects, investors could consider adding fundamentally strong tech stocks Zoom Video Communications, Inc. (ZM), Materialise NV (MTLS), and Issuer Direct Corporation (ISDR) to their portfolio.
Before exploring the fundamentals of these stocks, let’s discuss why the tech industry is well-positioned for growth.
Thanks to increased investments in digitization, the technology sector is expanding rapidly. Enterprises are using technology to streamline business processes, automate tasks, and modernize their operations by switching to cloud-based solutions. Gartner forecasts worldwide IT spending to rise 6.8% year-over-year to $5 trillion this year.
The demand for tech services is fueled by digital transformation, cloud adoption, business intelligence, increased demand for data security and privacy protection, and companies' emphasis on cost-effectiveness. The U.S. IT services market is projected to reach $630.76 billion, growing at a CAGR of 6.5% until 2029.
Meanwhile, the global IT services market is estimated to grow at a CAGR of 8.4% to reach $1.81 trillion by 2029. In addition, 3D printing is gaining popularity in industries such as healthcare, automotive, aerospace and defense, industrial, and consumer electronics.
Businesses incorporate 3D printing into their operations to reduce production time, cut costs and waste, improve workflows, create complex designs, and revolutionize supply chains through on-demand and localized manufacturing.
The global 3D printing industry will reach $23.41 billion by 2031, growing at a 15.5% CAGR. This growth will be driven by the increasing demand for customized products and rapid prototyping in various industries.
Moreover, investors’ interest in tech stocks is evident from the iShares U.S. Technology ETF’s (IYW) 53.7% returns over the past year.
Considering these conducive trends, let’s look at the fundamentals of the featured tech stocks.
Zoom Video Communications, Inc. (ZM)
ZM provides a unified communications platform, including video meetings, phone services, and virtual event solutions, serving diverse industries globally. Its services range from individual users to enterprise-level applications.
ZM’s trailing-12-month Return on Total Assets of 6.42% is 379.7% higher than the 1.34% industry average. Its 14.08% trailing-12-month net income margin is 436% higher than the 2.63% industry average. Also, its 5.19% trailing-12-month Return on Total Capital is 119.5% higher than the 2.37% industry average.
During the fourth fiscal quarter, which ended January 31, 2024, ZM’s revenue grew 2.6% year-over-year to $1.15 billion. Its non-GAAP income from operations came in at $443.75 million, up 9.6% year-over-year. The company’s non-GAAP net income and net income per share increased 21.1% and 16.4% from the prior-year quarter to $443.97 million and $1.42, respectively.
Street expects ZM's revenue and EPS for the quarter ending March 31, 2024, to increase 1.9% and 2.4% year-over-year to $1.13 billion and $1.19, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 9% to close the last trading session at $66.86.
ZM'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.
ZM has a B grade for Growth, Value, and Quality. Within the Technology - Services industry, it is ranked #10 out of 81 stocks. To see ZM’s additional ratings for Momentum, Stability, and Sentiment, click here.
Materialise NV (MTLS)
MTLS, headquartered in Leuven, Belgium, provides additive manufacturing, medical software, and 3D printing services in the Americas, Europe, Africa, and the Asia-Pacific. The company operates through three segments: Materialise Software, Materialise Medical, and Materialise Manufacturing.
MTLS’ trailing-12-month gross profit margin of 56.66% is 15.5% higher than the industry average of 49.04%. Its trailing-12-month EBITDA margin of 10.62% is 17.4% higher than the industry average of 9.04%. Additionally, its 3.61% trailing-12-month CAPEX / Sales is 58.6% higher than the 2.27% industry average.
For the fiscal fourth quarter that ended December 31, 2023, MTLS’ revenue increased 4.1% year-over-year to €65.30 million ($72.15 million), while its gross profit rose 5.2% from the prior-year quarter to €37.55 million ($41.49 million). Also, its adjusted EBITDA came in at €8.47 million ($9.23 million), up 99% from the prior-year quarter.
As of December 31, 2023, MTLS’ total current liabilities stood at €104.95 million ($114.33 million), compared to €106.11 million ($115.60 million) as of December 31, 2022.
For the quarter ending June 30, 2024, MTLS’ revenue is expected to increase 1.4% year-over-year to $72.93 million. For fiscal 2025, MTLS’ revenue and EPS are expected to increase 9.6% and 44.4% year-over-year to $320.95 million and $0.28, respectively. Over the past six months, the stock has declined 12.5% to close the last trading session at $5.04.
MTLS’ strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #2 out of 5 stocks in the Technology - 3D Printing industry. It has an A grade for Value and a B for Stability and Sentiment. Click here to see the additional ratings of MTLS for Growth, Momentum, and Quality.
Issuer Direct Corporation (ISDR)
ISDR is a communications and compliance company providing solutions for public relations and investor relations professionals worldwide. It offers press release distribution, media databases, and newsroom through the media advantage platform; ACCESSWIRE, a news dissemination and media outreach service; and the Visual Webcaster platform.
On February, 20, 2024, ISDR announced a collaboration with ASTA-USA Translation Services, a specialized language services provider. This partnership aims to enhance communication and understanding across diverse languages and cultures. ASTA-USA's expertise will support ISDR in delivering accurate and culturally sensitive translations for their global initiatives.
ISDR’s trailing-12-month gross profit margin of 76.24% is 55.5% higher than the 49.04% industry average. Likewise, the stock’s trailing-12-month EBITDA margin of 18.75% is 107.4% higher than the industry average of 9.04%. It trailing-12-month Return on Total Capital 3.71% is 56.7% higher than the industry average of 2.37%.
ISDR’s revenues for the fourth quarter that ended December 31, 2023, increased 5.6% year-over-year to $7.54 million, and its gross profit grew 5.9% from the year-ago value to $5.57 million. Its non-GAAP net income and net income per share came in at $575 million and $0.15, respectively. Also, its adjusted EBITDA was $1.07 million, up 4.9% year-over-year.
Analysts expect ISDR’s revenue for the quarter ending March 31, 2024, to increase 0.2% year-over-year to $8.63 million. Shares of ISDR have declined 19.5% over the past month to close the last trading session at $12.14.
It’s no surprise that ISDR has an overall B rating, equating to a Buy in our POWR Ratings system.
It has an A grade for Sentiment and a B for Growth and Value. It is ranked #24 in the Technology - Services industry. Beyond what is stated above, we’ve also rated ISDR for Momentum, Stability, and Quality. Get all ISDR ratings here.
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ZM shares were trading at $67.11 per share on Thursday morning, up $0.25 (+0.37%). Year-to-date, ZM has declined -6.68%, versus a 10.40% 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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