Although the wild volatility of 2022 negatively impacted most sectors, tech stocks disproportionately suffered extensive damage. Fundamentally, though, this narrative isn’t particularly surprising. Typically, growth-oriented enterprises, companies levered to the broader innovation space, become disincentivized during risk-off cycles. However, contrarian investors can take advantage of this framework by picking up compelling names at bargain prices, such as the underappreciated tickers KLIC, CTSH, and EVTC.
Arguably the biggest headwind affecting tech stocks centers on the Federal Reserve. Earlier this year, Fed chair Jerome Powell committed to attacking the inflation crisis by raising the benchmark interest rate. As some data poured in suggesting that the central bank might ease the aggressiveness in monetary tightening, the equities sector began rebounding.
However, the latest jobs report for November poured cold water on such notions. With employment data coming in hotter than expected, this dynamic confirmed that prior rate hikes simply weren’t enough. In other words, the Fed needs to take the gloves off. Of course, the risk here centers on longer-term consequences. Move the needle too much, and a global recession might materialize.
Nevertheless, while speculative innovators may incur more volatility, even conservative investors shouldn’t outright ignore all tech stocks. Undergirding both contemporary needs and the industries of tomorrow, advanced business enterprises bring core relevancies to the table. Further, the market’s crimson stains facilitate discounts for under-the-radar investments.
Below are three tech stocks to pick up at rock-bottom rates.
Kulicke & Soffa (NASDAQ:KLIC)
Based in Singapore, Kulicke & Soffa doesn’t really resonate with U.S.-based investors. Per its corporate profile, Kulicke & Soffa is a leading provider of semiconductor, light-emitting diode (LED), and electronic assembly solutions serving the global automotive, consumer, communications, computing, and industrial markets. Essentially, the company represents the nuts and bolts of the tech-driven economy.
While KLIC usually flies under the radar, astute investors will want to pay close attention to the underlying organization. First and foremost, Kulicke & Soffa features excellent balance sheet stability, highlighted by a cash-to-debt ratio of 18.6 times. This metric ranks better than 76% of the semiconductor industry. As well, KLIC enjoys an Altman Z-Score (a solvency metric) of 8.03, reflecting extremely low bankruptcy risk.
On the income statement, the company features a three-year revenue growth rate of 44.2%, beating out nearly 95% of the competition. Its net margin stands at 28.83%, ranking well within the top 10% of the underlying industry.
If these figures weren’t enough to inspire a tempting look at the “buy” button, the market prices KLIC at only 6.7x trailing-12-month (TTM) earnings. In contrast, the industry median is near 18x. Therefore, KLIC deserves consideration as one of the tech stocks to pick up at bargain prices.
Is KLIC Stock a Buy, According to Analysts?
Turning to Wall Street, KLIC stock has a Moderate Buy consensus rating based on one Buy, two Holds, and zero Sell ratings. The average KLIC price target is $52.50, implying 11% upside potential.
Cognizant Technology Solutions (NASDAQ:CTSH)
Headquartered in Teaneck, New Jersey, Cognizant is a multinational information technology services and consulting firm. Specifically, it provides business process outsourcing services for several industries, including banking, health care, manufacturing, media, and entertainment. Though CTSH may have slipped more than 32% since the start of the year, over the trailing month, it’s gained nearly 13%.
Financially, Cognizant will likely attract bargain hunters of tech stocks because of its undervalued profile. Currently, the market prices CTSH at 13.3x TTM earnings and 12.7x forward earnings. Both are relatively undervalued compared to the underlying software industry, especially the latter. The median forward price/earnings ratio for software specialists stands at 23.4x.
In addition, Cognizant commands excellent profitability metrics. For example, its net margin is 12.1%, rated better than over 82% of the competition. As well, the company’s return on equity (ROE) pings at 19.73%, beating out 84% of its rivals. Such a relatively high ROE also reflects that Cognizant carries a very high-quality business.
Is CTSH Stock a Buy, According to Analysts?
Turning to Wall Street, CTSH stock has a Hold consensus rating based on two Buys, 14 Holds, and two Sell ratings. The average CTSH price target is $62.19, implying 4.7% upside potential.
Evertec (NASDAQ:EVTC)
Based out of Puerto Rico, Evertec bills itself as a leading full-service transaction processing business in the Caribbean, Latin America, and its home market. Further, Evertec provides a broad range of merchant acquiring, payment processing, and business solutions services. The company manages a system of electronic payment networks that process more than two billion transactions annually.
As with the other bargain tech stocks, EVTC entices because of its undervalued nature. Presently, Wall Street prices EVTC at 8.8x trailing earnings. In contrast, the median print for the software industry is 25.66x. In addition, Evertec’s Shiller P/E ratio is 20.6x, coming in favorably below the sector median of 30.33x.
Moreover, the company delivers excellent profitability metrics. For instance, its operating and net margins stand at 27.25% and 41.09%, respectively. Both stats rank better than at least 94% of the competition. Plus, Evertec’s ROE pings at 53.69%, beating over 96% of its peers and representing an extremely high business quality.
Is EVTC Stock a Buy, According to Analysts?
Turning to Wall Street, EVTC stock has a Hold consensus rating based on two Buys, one Hold, and one Sell rating. The average EVTC price target is $36.25, implying 13.9% upside potential.
The Takeaway: Certain Tech Stocks are Too Good to Pass Up
While many publicly-traded innovators feature red ink that bleeds a bit too deeply, some tech stocks manage to deliver relatively trustworthy discounts. With investors focused on popular companies, astute investors may be better served by going off the beaten path.
