While the technology industry has been struggling with macroeconomic headwinds, its long-term prospects remain bright. So, fundamentally solid tech stocks, Lenovo Group Limited (LNVGY), Ricoh Company, Ltd. (RICOY), and KVH Industries, Inc. (KVHI), might be worth adding to your watchlist.
The US technology market accounts for 35% of the global market. According to the most recent Gartner prediction, global spending on information technology would hit $4.6 trillion in 2023, a 5.5% rise from 2022. The emergence of the cloud and 5G is enabling greater innovation.
“Macroeconomic headwinds are not slowing digital transformation,” said John-David Lovelock, Distinguished VP Analyst at Gartner. “IT spending will remain strong, even as many countries are projected to have near-flat gross domestic product (GDP) growth and high inflation in 2023. Prioritization will be critical as CIOs look to optimize spend while using digital technology to transform the company’s value proposition, revenue, and client interactions,” he added.
Investors’ interest in tech stocks is evident from the Technology Select Sector SPDR ETF’s (XLK) 15.8% returns over the past three months.
Let’s delve deeper into the fundamentals of the stocks mentioned above.
Lenovo Group Limited (LNVGY)
Based in Quarry Bay, Hong Kong, LNVGY, an investment holding company, develops, produces, and distributes technological goods and services. It is divided into three segments: Intelligent Devices Group, Infrastructure Solutions Group, and Solutions and Services Group.
On April 24, 2023, LNVGY and Critical Start, a leading supplier of Managed Detection and Response (MDR) cybersecurity solutions, announced today a new relationship to improve security inside the company’s Digital Workplace Solutions (DWS) Group.
Randy Watkins, Chief Technology Officer at Critical Start, “We are thrilled to partner with Lenovo to help organizations defend against today’s sophisticated cyber threats.”
In terms of forward Price/Sales multiple, LNVGY is trading at 0.20 is 92.6% lower than the industry average of 2.63. In addition, LNVGY’s forward EV/Sales of 0.21x is 92.3% lower than the industry average of 2.69x.
LNVGY’s trailing-12-month ROTA of 4.57% is significantly higher than the industry average of 0.26%. Its trailing-12-month ROCE of 44.88% is significantly higher than the industry average of 0.71%.
LNVGY’s total assets and current assets amounted to $44.51 billion and $28.99 billion for the period that ended March 31, 2023, compared to $37.99 billion and $23.34 billion for the period ended March 31, 2022, respectively.
The consensus revenue estimate of $63.81 billion for the year ending March 2024 represents a 2.9% increase year-over-year. Its EPS is expected to grow at 2.7% year-over-year to $2.66 for the same period. LNVGY’s shares have gained 23.6% over the past six months to close the last trading session at $20.28.
LNVGY’s POWR Ratings reflect this promising outlook. The stock 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.
LNVGY has an A grade for Value and a B for Stability. Within the Technology - Hardware industry, it is ranked #12 out of 44 stocks. Click here for the additional POWR Ratings for Growth, Momentum, Sentiment, and Quality for LNVGY.
Ricoh Company, Ltd. (RICOY)
Headquartered in Tokyo, Japan, RICOY is engaged in integrated domestic and overseas manufacturing services. The company’s segments include Imaging & Solutions; Industrial Products; and Other.
RICOY’s trailing-12-month EV/Sales multiple of 0.38 is 85.8% lower than the industry average of 2.69. Its trailing-12-month Price/Sales multiple of 0.32 is 87.9% lower than the industry average of 2.63.
Its trailing-12-month ROCE of 5.93% is 736% higher than the 0.71% industry average. Its trailing-12-month ROTA of 2.53% is 870.5% higher than the 0.26% industry average.
RICOY’s sales increased 21.3% year-over-year to ¥2.13 trillion ($1.55 billion) for the year ended March 31, 2023. Also, its operating income came in at ¥78.74 billion ($570.93 million), up 96.6% year-over-year. Its profit and EPS came in at ¥54.37 billion ($394.21 million) and ¥88.10, up 79% and 94.3% year-over-year.
Analysts expect RICOY’s revenue to increase 318.1% year-over-year to $15.61 billion in 2024. Its EPS is expected to grow 9.17% year-over-year to $0.75 in 2024. The stock has gained 9.3% over the past three months to close its last trading session at $8.27.
It’s no surprise that RICOY has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Value and a B for Growth, Stability, and Quality. It is ranked #5 in the same industry.
Beyond what is stated above, we’ve also rated RICOY for Sentiment and Momentum. Get all RICOY ratings here.
KVH Industries, Inc. (KVHI)
KVHI, together with its subsidiaries, designs, develops, manufactures, and markets mobile connectivity products and services for the marine and land mobile markets in the United States and internationally.
KVHI’s forward EV/Sales multiple of 0.81 is 69.8% lower than the industry average of 2.69. Its forward EV/EBITDA multiple of 6.34 is 54.2% lower than the industry average of 13.84.
KVHI’s trailing-12-month net income margin of 20.64x is 773.2% higher than the 2.36x industry average. Its trailing-12-month ROTA of 15.09% is significantly higher than the 0.26% industry average.
For the first quarter that ended March 31, 2022, KVHI’s net sales increased marginally year-over-year to $33.69 million. Its service sales grew 8.1% year-over-year to $28.74 million. Furthermore, its total cost and expenses came in at $34.24 million, down 8.5% year-over-year.
Street expects KVHI’s revenue to increase 7.8% year-over-year to $149.75 million in 2023. Its EPS is expected to grow 315.4% year-over-year to $0.36 in 2023. It surpassed EPS estimates in three of four trailing quarters. Over the past year, the stock has gained 28.9% to close its last trading session at $9.44.
KVHI’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, translating to Buy in our proprietary rating system.
It also has an A grade for Growth. It is ranked #11 within the same industry. Click here to see the additional ratings for KVHI (Stability, Value, Momentum, Sentiment, and Quality).
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LNVGY shares were unchanged in premarket trading Tuesday. Year-to-date, LNVGY has gained 25.26%, versus a 9.93% 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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