Last year, the tech industry incurred huge losses amid inflationary pressures, aggressive interest rate hikes by the Federal Reserve, and layoffs. As reported in November 2022, the tech industry had already lost a massive $7.40 trillion in a year.

However, the industry is poised to grow in the foreseeable future. There has been a rising demand for advanced tech solutions and increased investments due to rapid digitalization, which should aid quality tech stocks in the long run.

According to an Ernst & Young tech leaders' poll, 74% of business leaders see opportunities for their organizations despite recessionary concerns. Furthermore, the global information technology market is expected to grow at an 8.8% CAGR to $13.09 trillion in 2026.

In addition, according to Gartner’s new survey, tech spending will rise about 5.1% in 2023 after a gain of less than 1% the previous year. Gartner expects cloud computing revenues to rise $101 billion in 2023, more than $90 billion in 2021, while worldwide end-user spending on public cloud services is forecasted to grow 20.7% to total $591.80 billion in 2023, up from $490.30 billion in 2022.

Given this backdrop, we think fundamentally strong high-quality tech stocks Gartner, Inc. (IT) and The Hackett Group, Inc. (HCKT) could be solid buys now to garner good returns.

Gartner, Inc. (IT)

IT operates as a global research and advisory company. The firm operates through its three broad segments: Research; Conferences; and Consulting.

IT’s trailing-12-month gross profit margin of 69.34% is 40% higher than the industry average of 49.53%. Also, its trailing-12-month EBIT margin of 19.85% is 199.7% higher than the industry average of 6.62%.

For the third quarter of the fiscal year 2022 ended September 30, IT’s revenues increased 15.2% year-over-year to $1.33 billion. During the same period, the company’s adjusted EBITDA increased 8.9% year-over-year to $332 million, while the adjusted net income increased 12.2% year-over-year to $193 million. The company’s adjusted EPS came in at $2.41, up 18.7% year-over-year.

Analysts expect IT’s revenue to increase 8.6% year-over-year to $1.37 billion during the fiscal first quarter ending March 2023. During the same quarter, the company’s EPS is expected to come in at $2.01. IT has topped consensus EPS and revenue estimates in all four trailing quarters, which is impressive.

The stock has gained 21.5% over the past three months and 37.6% over the past six months to close the last trading session at $336.14.

IT’s POWR Ratings reflect a promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

IT is also rated an A in Quality and a B in Sentiment. Within the A-rated Outsourcing - Tech Services industry, it is ranked #3 out of 9 stocks.

To see additional POWR Ratings for Value, Stability, Growth, and Momentum for IT, click here.

The Hackett Group, Inc. (HCKT)

HCKT operates as a strategic advisory and technology consulting firm. It offers best practice accelerators that provide web-based access to best practices, customized software configuration tools and best practice process flows, and advisor inquiry for fact-based advice on proven approaches and methods.

On December 13, HCKT announced the final results of its modified “Dutch auction” tender offer, accepting to purchase a total of 4,889,315 shares of its Common Stock at a purchase price of $23.50 per share for an aggregate cost of approximately $114.90 million, excluding fees and expenses relating to the offer.

HCKT’s trailing-12-month net income margin of 16.38% is 404.6% higher than the industry average of 3.25%. Also, its trailing-12-month EBIT margin of 18.24% is 175.5% higher than the industry average of 6.62%.

HCKT’s total revenue increased marginally year-over-year to $72.03 million for the third quarter ended September 30, 2022. Its operating income increased 23.1% year-over-year to $14.03 million. The company’s adjusted net income and adjusted net income per share came in at $11.84 million and $0.37, respectively, representing a 15.5% and 19.4% increase from the prior year's quarter.

For the fiscal year ending December 2023, Street expects HCKT’s revenue and EPS to increase 1.9% and 9.4% year-over-year to $297.22 million and $1.59, respectively. HCKT has surpassed EPS estimates in each of the trailing four quarters, which is impressive.

Over the past six months, the stock has gained 5.6% to close the last trading session at $20.37. Moreover, it has gained 15% over the past three months.

HCKT has an overall B rating, which translates to Buy in our proprietary rating system. It has an A grade for Quality and a B for Sentiment. Within the Outsourcing - Tech Services industry, HCKT is ranked first.

Beyond what we’ve stated above, we have also given HCKT grades for Growth, Value, Stability, and Momentum. Get all HCKT ratings here.

IT shares were unchanged in premarket trading Tuesday. Year-to-date, IT has declined 0.00%, versus a 0.00% rise in the benchmark S&P 500 index during the same period.

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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