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One helpful way to look at a company’s profitability is by comparing net margin over time. Net margin, or net income/revenue, is the company’s “bottom line” number and it also indicates how controlled a company’s cost structure is. Increases in net margin over time indicate improved profitability.

We ran a screen on tech stocks that appear undervalued to earnings growth, with PEG below 1. We screened these companies for those with increases in net margin, comparing the trailing-twelve-month ratio to the company’s five-year average.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.


We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

click on image to enlarge

Do you think these companies have strong operations? Use this list as a starting-off point for your own analysis.

List sorted by market cap:

  1. Atmel Corporation (ATML): Semiconductor Industry. Market cap of $4.58 billion. PEG at 0.28. TTM net margin at 33.02% vs. 5-year average at 3.04%. The stock is currently stuck in a downtrend, trading 18.3% below its SMA20, 27.16% below its SMA50, and 29.98% below its SMA200. The stock has performed poorly over the last month, losing 23.56%.
  2. Intersil Corporation (ISIL): Semiconductor Industry. Market cap of $1.37 billion. PEG at 0.87. TTM net margin at 11.45% vs. 5-year average at -19.01%. The stock is currently stuck in a downtrend, trading 8.87% below its SMA20, 13.18% below its SMA50, and 19.79% below its SMA200. The stock has gained 6.88% over the last year.
  3. Cirrus Logic Inc. (CRUS): Semiconductor Industry. Market cap of $942.14 million. PEG at 0.27. TTM net margin at 51.35% vs. 5-year average at 23.68%. The stock is currently stuck in a downtrend, trading 8.86% below its SMA20, 10.58% below its SMA50, and 22.47% below its SMA200. The stock has had a couple of great days, gaining 10.39% over the last week. The stock has performed poorly over the last month, losing 15.69%.
  4. 3D Systems Corporation (DDD): Application Software Industry. Market cap of $877.66 million. PEG at 0.96. TTM net margin at 17.85% vs. 5-year average at -3.05%. The stock is a short squeeze candidate, with a short float at 10.46% (equivalent to 8.1 days of average volume). The stock has had a couple of great days, gaining 9.71% over the last week. The stock has performed poorly over the last month, losing 32.03%.
  5. BroadSoft, Inc. (BSFT): Application Software Industry. Market cap of $845.65 million. PEG at 0.91. TTM net margin at 26.59% vs. 5-year average at -6.73%. The stock is currently stuck in a downtrend, trading 7.48% below its SMA20, 18.36% below its SMA50, and 16.4% below its SMA200. The stock has had a couple of great days, gaining 13.53% over the last week. The stock has performed poorly over the last month, losing 21.25%.
  6. Brooks Automation Inc. (BRKS): Semiconductor Equipment & Materials Industry. Market cap of $611.72 million. PEG at 0.24. TTM net margin at 18.74% vs. 5-year average at -12.35%. The stock is currently stuck in a downtrend, trading 6.77% below its SMA20, 12.41% below its SMA50, and 17.15% below its SMA200. The stock has had a couple of great days, gaining 6.44% over the last week.
  7. Medidata Solutions, Inc. (MDSO): Healthcare Information Services Industry. Market cap of $390.42 million. PEG at 0.83. TTM net margin at 17.37% vs. 5-year average at -6.44%. The stock is a short squeeze candidate, with a short float at 5.65% (equivalent to 5.1 days of average volume). The stock has performed poorly over the last month, losing 29.65%.
  8. Nanometrics Incorporated (NANO): Scientific & Technical Instruments Industry. Market cap of $375.13 million. PEG at 0.43. TTM net margin at 26.50% vs. 5-year average at -11.36%. The stock has had a couple of great days, gaining 7.89% over the last week. The stock has performed poorly over the last month, losing 12.06%.
  9. Entropic Communications, Inc. (ENTR): Semiconductor Industry. Market cap of $356.22 million. PEG at 0.26. TTM net margin at 29.98% vs. 5-year average at -19.47%. This is a risky stock that is significantly more volatile than the overall market (beta = 2.6). The stock is a short squeeze candidate, with a short float at 28.39% (equivalent to 7.93 days of average volume). The stock has had a couple of great days, gaining 15.41% over the last week. T
  10. Rubicon Technology, Inc. (RBCN): Semiconductor Industry. Market cap of $315.42 million. PEG at 0.36. TTM net margin at 40.18% vs. 5-year average at 7.14%. The stock is a short squeeze candidate, with a short float at 40.87% (equivalent to 10.16 days of average volume). The stock is currently stuck in a downtrend, trading 6.91% below its SMA20, 18.48% below its SMA50, and 39.46% below its SMA200. The stock has had a couple of great days, gaining 7.04% over the last week.
  11. LTX-Credence Corporation (LTXC): Semiconductor Equipment & Materials Industry. Market cap of $314.52 million. PEG at 0.32. TTM net margin at 23.73% vs. 5-year average at -13.80%. This is a risky stock that is significantly more volatile than the overall market (beta = 2.55). The stock has had a couple of great days, gaining 7.63% over the last week.

*Net margin data sourced from Screener.co, all other data sourced from Finviz.

Source: 11 Undervalued Tech Stocks With Rising Profitability