Tech industry is thriving amid the growing emphasis on digitization, cloud computing and big data analytics across industries. In light of this, I think it could be wise to capitalize on the industry’s tailwinds by investing in quality tech stocks Box, Inc. (BOX), Daktronics, Inc. (DAKT), and M-tron Industries, Inc. (MPTI).
The tech industry is evolving with new trends, constant innovations and disruptions that could reasonably drive its growth. Moreover, firms focusing more on digital with access to advanced technologies for driving growth while decreasing cost, growing usage of cloud technologies, and using business intelligence to earn increased revenues are fueling growth in the IT market.
The United States IT Services market is expected to grow at a CAGR of 6.5% until 2028.
Furthermore, the proliferation of cloud computing and big data analytics has particularly contributed to the growth of the IT hardware market. Cloud service providers and enterprises require powerful servers, storage systems, and networking equipment to host and process vast amounts of data in real time.
As a result, the IT hardware market is expected to grow at a CAGR of 7.9% until 2028.
Considering these conducive trends, let’s take a look at the fundamentals of the three best tech stocks.
Box, Inc. (BOX)
BOX provides a cloud content management platform that enables organizations of various sizes to manage and share their content from anywhere on any device.
On November 1, 2023, BOX announced an expanded partnership to transform work in the enterprise with generative AI. BOX will integrate with Vertex AI to build new gen AI features that help customers more efficiently process and analyze data stored in the Box Content Cloud, which is also now available to customers directly through Google Cloud Marketplace.
On October 11, 2023, BOX announced a partnership to help organizations of all sizes secure their data in the cloud and stop data-related breaches. The partnership includes a new integration between BOX’s secure content management and collaboration capabilities with CrowdStrike’s modern, AI-powered security CrowdStrike Falcon platform for real-time access control and threat prevention.
As a result, security and IT teams can detect malicious files, ransomware, and suspicious activity as well as configure security policies directly in BOX’s administrative console.
Its trailing-12-month levered FCF margin of 30.52% is 275.9% higher than the 8.12% industry average. Its trailing-12-month gross profit margin of 75.08% is 53.6% higher than the 48.88% industry average.
For the fiscal second quarter that ended July 31, 2023, BOX’s revenue and gross profit stood at $261.43 million and $194.42 million, up 6.3% and 7.3% year-over-year, respectively. Its non-GAAP free cash flow increased 14.5% year-over-year to $20.57 million.
For the same quarter, its net income attributable to common stockholders came at $5.74 million, compared to a net loss attributable to common stockholders of $3.26 million. Its net income per share stood at $0.04, compared to a net loss per share of $0.02 in the year-ago quarter.
Analysts expect BOX’s EPS to rise 22.7% year-over-year to $0.38 in the fiscal third quarter ended October 2023. Its revenue is expected to increase 4.8% year-over-year to $262.01 million for the same quarter. Also, the company has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 2.9% over the past month to close the last trading session at $26.13.
BOX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
BOX has an A grade for Growth and Quality and a B in Value. It ranks #7 out of 75 stocks in the Technology – Services industry.
In addition to the POWR Ratings highlighted above, one can see BOX’s ratings for Momentum, Stability, and Sentiment here.
Daktronics, Inc. (DAKT)
DAKT designs, manufactures, and markets electronic display systems and related products for sporting, commercial, and transportation applications in the United States and internationally. It operates through Commercial; Live Events; High School Park and Recreation; Transportation; and International segments.
DAKT’s trailing-12-month EBIT margin of 8.80% is 87.6% higher than the 4.69% industry average. Its trailing-12-month EBITDA margin of 10.96% is 21.2% higher than the 9.04% industry average.
For its first quarter, which ended July 29, 2023, its net sales and gross profit grew 35.3% and 175.8% year-over-year to $232.53 billion and $71.15 billion, respectively.
The company generated adjusted net income of $28.75 billion, up 639.7% year-over-year. Its EPS and free cash flow grew 450% and 144.5% year-over-year to $0.42 and $14.73 billion, respectively.
Over the past year, the stock has gained 213.5% to close the last trading session at $11.41.
DAKT’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
DAKT has an A grade for Value and a B for Growth, Sentiment, and Quality. It ranks#2 in the B-rated Technology - Hardware industry.
Click here to access additional DAKT ratings (Momentum, and Stability).
M-tron Industries, Inc. (MPTI)
MPTI engages in the design, manufacture, and marketing of frequency and spectrum control products.
Its trailing-12-month EBITDA margin of 15.37% is 69.9% higher than the 9.04% industry average. Its trailing-12-month EBIT margin of 13.28% is 183.1% higher than the 4.69% industry average.
MPTI’s revenues increased 29.4% year-over-year to $10.89 million in its fiscal third quarter (ended September 30, 2023). The company’s adjusted EBITDA increased 166.7% year-over-year to $2.34 million, while its net income grew 215.3% year-over-year to $1.59 million. Its net income per share increased 200% year-over-year to $0.57.
Street expects MPTI’s EPS to rise 345.5% year-over-year to $0.43 in the current quarter ending December 2023. Its revenue is expected to increase 29.1% year-over-year to $11.20 million for the same quarter. Also, the company has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.
The stock has gained 215.3% over the past six months to close its last trading session at $37.99.
It’s no surprise that the stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
MPTI has an A grade for Sentiment and Quality and a B in Growth. It has ranked #5 in the B-rated Technology - Electronics industry.
Beyond what is stated above, we’ve also rated MPTI for Momentum, Value, and Stability. Get all MPTI ratings here.
What To Do Next?
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BOX shares were trading at $25.91 per share on Tuesday morning, down $0.22 (-0.84%). Year-to-date, BOX has declined -16.77%, versus a 19.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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