According to finviz.com screener, the technology sector has been a laggard so far this year. The screener's database includes 6,610 companies which are trading in the U.S. markets; the screener relates 872 of them to the technology sector. According to finviz.com, the total return of the technology sector in 2013 was at 18.9%, while the appreciation of the Russell 3000 index in the same period was 22.9%. Nevertheless, it is possible to find promising candidates among the stocks in this sector.
Stock sectors' total returns, year to date, are shown in the chart below:
I have searched for very profitable companies with very strong growth prospects among the Technology sector. Those stocks would have to show a very low debt and very low PEG ratios.
I used the finviz.com Screener to perform the search. The screen's formula requires all stocks to comply with all following demands:
- Sector - Technology
- P/E - Under 20
- EPS growth next 5 years - Over 20%
- Debt/Equity - Under 0.2
After running the screen, 8 stocks came out, as a result. In this article, I describe three of these stocks which in my opinion can reward an investor a nice capital gain. I recommend readers use this list of stocks as a basis for further research. All the data for this article were taken from finviz.com, on September 21, 2013.
CalAmp Corp. (NASDAQ:CAMP)
CalAmp Corp. develops and markets wireless communications solutions that deliver data, voice, and video for critical networked communication and other applications primarily in the United States.
Source: company presentation
CalAmp Corp. has a very low debt (total debt to equity is only 0.06), and it has a very low trailing P/E of 12.53 and a forward P/E of 17.74. The PEG ratio is very low at 0.56, and the average annual earnings growth estimates for the next five years is very high at 22.5%.
The CAMP stock price is 1.98% above its 20-day simple moving average, 7.04% above its 50-day simple moving average and 42.46% above its 200-day simple moving average. That indicates a short-term, mid-term and long-term uptrend.
Analysts recommend the stock. Among the five analysts covering the stock, two rate it as a strong buy, and three rate it as a buy.
CalAmp Corp. has recorded strong revenue and EPS growth, during the last year, the last three years and the last five years, as shown in the charts below.
Source: company presentation
CAMP will report its latest quarterly financial results on October 02. CAMP is expected to post a profit of $0.16 a share, a $0.01 decline from the company's actual earnings for the same quarter a year ago. The reported results will probably affect the stock price in the short term.
CalAmp Corp. has recorded strong revenue and EPS growth, and considering its cheap valuation metrics, CAMP stock still has room to rise.
Geospace Technologies Corp. (NASDAQ:GEOS)
Geospace Technologies Corporation designs and manufactures instruments and equipment used in the acquisition and processing of seismic data.
Geospace Technologies has no debt at all, and it has a trailing P/E of 16.62 and a low forward P/E of 13.35. The PEG ratio is extremely low at 0.45, and the average annual earnings growth estimates for the next five years is very high at 37%.
The GEOS stock price is 4.93% above its 20-day simple moving average and 4.72% above its 50-day simple moving average. That indicates a short-term and mid-term uptrend.
Analysts recommend the stock. Among the seven analysts covering the stock; three rate it as a strong buy, two rate it as a buy and two rate it as a hold.
Geospace Technologies has recorded consistent profitability and earnings growth during the last year, the last three years and the last five years, as shown in the charts below.
Source: company presentation
On August 06, Geospace Technologies reported its third-quarter fiscal 2013 financial results, which beat EPS expectations by $0.20 and beat on revenues. The company reported net income of $17.0 million, or $1.31 per diluted share, on revenues of $78.1 million for its fiscal quarter ended June 30, 2013. This compares with a net income of $10.7 million, or $0.83 per diluted share, on revenues of $55.2 million for the comparable quarter last year.
Geospace Technologies has recorded good revenue and EPS growth and it has compelling valuation metrics and very strong earnings growth prospects. Considering Geospace Technologies' ability to increase production output on drilling projects and the high cost of oil exploration, the growing demand for the company services should continue. In my opinion, an investor in GEOS stock can expect a significant capital gain.
Risks to the expected capital gain include a downturn in the U.S. economy, and decline in the price of oil and natural Gas.
Rofin-Sinar Technologies Inc. (NASDAQ:RSTI)
Rofin-Sinar Technologies Inc., together with its subsidiaries, engages in the design, development, engineering, manufacture, and marketing of laser-based products and solutions for industrial material processing applications worldwide.
Rofin-Sinar Technologies has a very low debt (total debt to equity is only 0.03), and it has a trailing P/E of 19.59 and a low forward P/E of 14.93. The PEG ratio is very low at 0.94, and the average annual earnings growth estimates for the next five years is very high at 20.9%.
The RSTI stock price is 2.93% above its 20-day simple moving average and 2.61% above its 50-day simple moving average. That indicates a short-term and mid-term uptrend.
On August 01, Rofin-Sinar Technologies reported its fiscal third quarter 2013 financial results, which beat EPS expectations by $0.04. Net sales totaled $139.1 million for the third quarter ended June 30, 2013, a 6% increase over the comparable quarter of fiscal year 2012. Gross profit totaled $49.3 million, or 35% of net sales, compared to $49.3 million, or 37% of net sales, in the same period of fiscal year 2012. RSTI net income amounted to $8.7 million, compared to $8.4 million in the third quarter last fiscal year, and represented 6% of net sales in both periods. The diluted per share calculation equaled $0.31 for the quarter based upon 28.5 million weighted-average common shares outstanding, compared to the diluted per share calculation of $0.29 based upon 28.8 million weighted-average common shares outstanding for the same period last fiscal year.
Rofin has compelling valuation metrics, and strong earnings growth prospects, and considering that the stock is in an uptrend, RSTI stock can move higher.