The tech industry is experiencing growth due to digitization initiatives, leveraging cloud computing, data analytics, and AI, enhancing efficiency and customer experiences, and driving innovation across various sectors.
Against this backdrop, investors could consider buying fundamentally strong tech stocks TravelSky Technology Limited (TSYHY), Viavi Solutions Inc. (VIAV), and M-tron Industries, Inc. (MPTI). These stocks look undervalued at current prices. Before exploring the fundamentals of these stocks, let’s discuss why the tech industry is well-positioned for growth.
The NASDAQ Composite's 28.4% increase over the past year reflects investor confidence and optimism about the future of technology companies. Canalys predicts a 6.2% growth in worldwide IT spending to $4.94 trillion in 2024. Enterprises worldwide are investing in digitization to gain an edge over their competitors by making their operations efficient, modern, and agile.
The demand for tech services is growing as enterprises adopt cloud computing, cybersecurity solutions, and advanced technologies. The global IT services industry is expected to reach $1.32 trillion by 2027, growing at a CAGR of 4.1%. Additionally, as devices become interconnected, smarter, and highly intuitive, the demand for advanced electronic components is increasing.
The global electronics market is expected to grow at a CAGR of 6.8% to reach $368.40 billion by 2032. Furthermore, the demand for high-tech communication and networking equipment is expanding due to advances in 5G, satellite internet, growing cloud adoption, and the rise of data centers.
The global optical communication and networking market is expected to expand to $61.92 billion by 2031, with a CAGR of 8.6%. Investors’ interest in tech stocks is evident from the Technology Select Sector SPDR Fund’s (XLK) 31.5% returns over the past year.
Considering these conducive trends, let’s take a look at the fundamentals of the featured tech stocks.
TravelSky Technology Limited (TSYHY)
TSYHY, based in Beijing, specializes in offering information technology solutions to China’s aviation and travel industry. The company’s services encompass aviation information technology, distribution information technology, accounting, settlement, and clearing services.
TSYHY’s forward EV/EBIT of 7.64x is 42.8% lower than the industry average of 13.37x. Its forward EV/EBITDA of 5.02x is 45.8% lower than the industry average of 9.27x.
In terms of the trailing-12-month net income margin, TSYHY’s 20.03% is 341.7% higher than the 4.54% industry average. Likewise, its 11.40% trailing-12-month levered FCF margin is 106.3% higher than the 5.52% industry average. Additionally, its 18.77% trailing-12-month EBIT margin is 148.5% higher than the industry average of 7.55%.
For the fiscal year ended December 31, 2023, TSYHY’s total operating income increased 34% year-over-year to RMB 6.98 billion ($963.70 million). Its operating profits grew 129.4% from the year-ago value to RMB 1.60 billion ($221.41 million).
Also, net profit attributable to shareholders of the company rose 123.1% year-over-year to RMB 1.40 billion ($193.04 million). Additionally, the company’s earnings per share came in at RMB 0.48, registering an increase of 128.6% year-over-year.
TSYHY’s fiscal 2024 revenue is expected to increase 14.5% year-over-year to $1.11 billion. Over the past three months, the stock has gained 23.5% to close the last trading session at $11.82.
TSYHY’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.
TSYHY has a B grade for Growth, Stability, Sentiment, and Quality. Within the Technology - Services industry, it is ranked #8 out of 77 stocks. To see TSYHY’s Value and Momentum ratings, click here.
Viavi Solutions Inc. (VIAV)
VIAV provides network test, monitoring, and assurance solutions for communications service providers (CSPs), hyperscalers, network equipment manufacturers (NEMs), original equipment manufacturers (OEMs), and others. The company operates through the Network Enablement (NE), Service Enablement (SE), and Optical Security and Performance Products (OSP) segments.
VIAV’s forward EV/Sales of 1.95x is 29% lower than the industry average of 2.75x. Its forward Price/Sales of 1.74x is 36.8% lower than the industry average of 2.76x. Additionally, its forward non-GAAP P/E of 21.13x is 8.2% lower than the industry average of 23.02x.
VIAV’s trailing-12-month gross profit margin of 59.06% is 21.4% higher than the industry average of 48.67%. Its trailing-12-month EBITDA margin of 10.30% is 8.5% higher than the industry average of 9.50%. Additionally, its 3.03% trailing-12-month CAPEX / Sales is 30.7% higher than the 2.32% industry average.
During the fiscal second quarter that ended December 30, 2023, VIAV’s revenue and gross profit came in at $254.50 million and $148 million, respectively. Moreover, its adjusted EBITDA stood at $43 million. For the same quarter, its non-GAAP earnings per share stood at $0.11.
As of December 30, 2023, VIAV’s current assets stood at $965.30 million, compared to $945 million as of July 1, 2023. Also, its total assets stood at $1.86 billion, compared to $1.85 billion for the same period.
Analysts expect VIAV’s revenue for the quarter ended March 31, 2024, to increase marginally year-over-year to $249.64 million. Its EPS for the quarter ending June 30, 2024, is expected to grow 8.6% year-over-year to $0.11. Over the past six months, the stock has gained 5.2% to close the last trading session at $7.95.
It’s no surprise that VIAV has an overall B rating, equating to a Buy in our POWR Ratings system.
It has a B grade for Growth and Quality. It is ranked #5 out of 46 stocks in the Technology – Communication/Networking industry. Beyond what is stated above, we’ve also rated VIAV for Value, Momentum, Stability, and Sentiment. Get all VIAV ratings here.
M-tron Industries, Inc. (MPTI)
MPTI designs, manufactures, and markets frequency and spectrum control products. Its portfolio is divided into two product groupings: Frequency Control and Spectrum Control.
MPTI’s forward Price/Sales of 1.58x is 42.7% lower than the industry average of 2.76x. Its forward Price/Book of 2.56x is 32.8% lower than the industry average of 3.81x. Also, its forward EV/Sales of 1.50x is 45.6% lower than the industry average of 2.75x.
In terms of the trailing-12-month levered FCF margin, MPTI’s 11.12% is 17.5% higher than the 9.46% industry average. Likewise, its 15.33% trailing-12-month EBIT margin is 213.1% higher than the 4.90% industry average. Also, its 17.40% trailing-12-month EBITDA margin is 83.2% higher than the 9.50% industry average.
MPTI’s net sales for the fourth quarter, which ended December 31, 2023, came in at $10.77 million, up 24.2% year-over-year. Its adjusted EBITDA stood at $2.43 million, up 117.7% year-over-year. Its net income and net income per share stood at $73 thousand and $0.03, respectively.
Moreover, As of December 31, 2023, MPTI’s current assets stood at $18.19 million, compared to $14.31 million as of December 31, 2022. Also, its cash and cash equivalent came in at $3.91 million, compared to $926 thousand for the same period.
Street expects MPTI’s revenue and EPS for the quarter ended March 31, 2024, to increase 17.4% and 145% year-over-year to $11 million and $0.49, respectively. Over the past nine months, the stock has gained 131.4% to close the last trading session at $25.68.
MPTI’s 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 has an A grade for Quality and a B for Value. It is ranked #5 out of 42 stocks in the Technology - Electronics industry. Click here to see MPTI's Growth, Momentum, Stability, and Sentiment ratings.
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TSYHY shares were unchanged in premarket trading Tuesday. Year-to-date, TSYHY has declined -31.22%, versus a 5.78% 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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