With the recent Facebook IPO, there is a lot of new interest in technology stocks. However, as soon as investors start digging into the tech sector, they realize that not all technology stocks actually return a profit. Further, most technology stocks peak during their IPOs, and see little growth thereafter. Today we set out to find technology stocks that defy those trends; we screened for tech stocks that have not only brought in solid profits, but also have growth on their horizon.
The Operating Profit Margin is a profitability ratio that measures the effectiveness of the company's operating efficiency. This metric allows investors to see how much profit is left after all variable costs are covered. If the company's margin is increasing over time this means that it's earning more per dollar of sales. Finding trends in the Operating Profit Margin helps investors identify companies that are improving profitability over time and managing the economic landscape better than competitors.
Return on Assets [ROA] illustrates how much a company is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. As well, it lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue very few can make very large profits with little investment.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 1-Year Expected EPS Growth Rate is an annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.
We first looked for technology stocks. Next, we then screened for businesses with strong profit margins (1-year operating margin>15%)(ROA > 10%). Next, we then screened for businesses that have high future earnings per share growth forecasts(1-year projected EPS Growth Rate>25%). We did not screen out any market caps.
Do you think these stocks are undervalued and have room to trade higher? Use our list along with your own analysis.
1) Spansion Inc. (CODE)
|Industry:||Semiconductor- Memory Chips|
Spansion Inc. has a Operating Profit Margin of 25.54% and Return on Assets of 15.46% and 1-Year Projected Earnings Per Share Growth Rate of 81.72%. The short interest was 4.73% as of 05/29/2012. Spansion Inc. engages in the design, development, manufacture, and sale of flash memory semiconductors worldwide. It offers flash memory solutions for microprocessors, controllers, and other programmable semiconductors that run applications in a range of electronic systems, including automotive and industrial, computing and communications, and consumer and gaming. The company's product designs are primarily based on its proprietary two-bit-per-cell MirrorBit technology.
2) Bally Technologies, Inc. (BYI)
Bally Technologies, Inc. has a Operating Profit Margin of 20.11% and Return on Assets of 10.78% and 1-Year Projected Earnings Per Share Growth Rate of 28.40%. The short interest was 8.03% as of 05/29/2012. Bally Technologies, Inc. operates as a diversified gaming company. The company designs, manufactures, operates, and distributes technology-based gaming devices, systems, and server-based solutions worldwide. It offers technology solutions, which provide gaming operators with a range of marketing, data management and analysis, accounting, player tracking, security, and other software applications and tools to manage their operations.
3) InvenSense, Inc. (INVN)
|Industry:||Semiconductor Equipment & Materials|
InvenSense, Inc. has a Operating Profit Margin of 30.74% and Return on Assets of 27.98% and 1-Year Projected Earnings Per Share Growth Rate of 39.34%. The short interest was 12.90% as of 05/29/2012. InvenSense, Inc. designs, develops, markets, and sells micro-electro-mechanical systems (MEMS) gyroscopes for motion processing solutions in consumer electronics. The company delivers next-generation motion processing based on its advanced multi-axis gyroscope technology by targeting applications in video game devices, handsets and tablet devices, digital still and video cameras, digital television and set-top box remote controls, 3D mice, portable navigation devices, and household consumer and industrial devices. Its products include MotionProcessing units (MPUs) and inertial measurement units (IMUs), which enable three-axis and six-axis functionality by integrating multiple sensors, as well as advanced DigitalMotion processor (DMP) functionality.
4) Hittite Microwave Corporation (HITT)
|Industry:||Semiconductor - Integrated Circuits|
Hittite Microwave Corporation has a Operating Profit Margin of 44.35% and Return on Assets of 16.87% and 1-Year Projected Earnings Per Share Growth Rate of 26.48%. The short interest was 6.49% as of 05/29/2012. Hittite Microwave Corporation designs, develops, and sells integrated circuits (ICS), modules, subsystems, and instrumentation products for radio frequency (RF) microwave and millimeterwave applications worldwide. The company's IC products include amplifiers, digital and voltage variable attenuators, broadband time delays, automatic gain control products, clocks and timing products, comparators, cross point switches, data converters, direct current power conditioning and power management products, dielectric resonator oscillators, frequency dividers and detectors, frequency multipliers, digital logic products, intermediate frequency signal processing products, interface, and limiting amplifiers. Its IC products also comprise mixers and converters, modulators and demodulators, multiplexers/demultiplexers, optical modulator drivers, passives, phase lock loops, phase lock loops with integrated voltage controlled oscillators, phase shifters, power detectors, sensors, switches, Successive detection logarithmic video amplifiers, transimpedance amplifiers, tunable filters, variable gain amplifiers, and voltage controlled and phase locked oscillators.
5) Altera Corp. (ALTR)
|Industry:||Semiconductor - Specialized|
Altera Corp. has a Operating Profit Margin of 37.57% and Return on Assets of 15.82% and 1-Year Projected Earnings Per Share Growth Rate of 26.90%. The short interest was 1.85% as of 05/29/2012. Altera Corporation, a semiconductor company, designs, manufactures, and markets programmable logic devices (PLD), HardCopy application-specific integrated circuit (ASIC) devices, pre-defined design building blocks, and associated development tools. The company's PLDs consist of field-programmable gate arrays (FPGAs) and complex programmable logic devices (CPLDs), which are standard semiconductor integrated circuits or chips to perform desired logic functions in the electronic systems; and HardCopy structured ASIC devices that comprise transition customer designs from high-density FPGAs to low-cost non-programmable implementations for volume production. Its products primarily include Stratix series high-end, system-level FPGAs; Arria series mid-range transceiver and embedded processor equipped FPGAs; Cyclone series low-cost transceiver and embedded processor equipped FPGAs; MAX series CPLDs; and HardCopy ASICs. The company's products also comprise intellectual property cores in hard and soft forms that are pre-verified building blocks that execute system-level functions; and development tools consisting primarily of the Quartus II software for design entry, design compilation, design verification, and device programming.
6) AXT Inc. (AXTI)
|Industry:||Semiconductor - Integrated Circuits|
AXT Inc. has a Operating Profit Margin of 23.86% and Return on Assets of 15.41% and 1-Year Projected Earnings Per Share Growth Rate of 40.63%. The short interest was 4.78% as of 05/29/2012. AXT, Inc., together with its subsidiaries, designs, develops, manufactures, and distributes compound and single element semiconductor substrates for use in wireless communications, lighting display applications, and fiber optic communications. It offers semi-insulating gallium arsenide substrates, which are used for applications in power amplifiers and radio frequency integrated circuits for wireless handsets; direct broadcast televisions; high-performance transistors; and satellite communications. The company also offers semi-conducting gallium arsenide substrates, which are used for applications in light emitting diodes, lasers, and optical couplers; substrates made from indium phosphide that are used in broadband and fiber optic communications; and substrates made from germanium, which are used in satellite and terrestrial solar cells, and optical applications.
7) ADTRAN Inc. (ADTN)
ADTRAN Inc. has a Operating Profit Margin of 23.27% and Return on Assets of 14.32% and 1-Year Projected Earnings Per Share Growth Rate of 40.25%. The short interest was 8.76% as of 05/29/2012. ADTRAN, Inc. designs, manufactures, markets, and services communications network solutions that enable voice, data, video, and Internet communications across wireline and wireless networks worldwide. Its Carrier Networks division provides fiber and copper-based solutions for service providers to deliver voice, data, and video services to customers' premises and mobile network cell sites. Its products enable services, such as voice, VoIP, IP television, RF video, high speed Internet access, and data services based upon Ethernet, frame relay, TDM, and ATM networks, connecting the network with user components, such as switches, routers, gateways, integrated access devices (IADs), private branch exchanges (PBXs), and telephone key systems.
8) Cognex Corporation (CGNX)
|Industry:||Scientific & Technical Instruments|
Cognex Corporation has a Operating Profit Margin of 26.36% and Return on Assets of 11.73% and 1-Year Projected Earnings Per Share Growth Rate of 25.15%. The short interest was 3.91% as of 05/29/2012. Cognex Corporation provides machine vision products that capture and analyze visual information to automate tasks primarily in manufacturing processes. It operates in two divisions, Modular Vision Systems and Surface Inspection Systems. The Modular Vision Systems division develops, manufactures, and markets modular vision systems that are used to automate the manufacture of discrete items, such as cellular phones, aspirin bottles, and automobile wheels by locating, identifying, inspecting, and measuring them during the manufacturing process.
*Company profiles were sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.