Looking to invest in the big dogs of the tech world? In the case of large cap tech stocks, the ones worth investing in are those that lead their space in innovation, and possess both proven business models as well as solid management. With these ideas in mind, we searched for large cap tech stocks that have well-defined sources of profitability, as well as positive ratings from tech industry analysts. We came up with an interesting list.
The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. EPS growth rates help investors identify stocks that are increasing or decreasing in profitability. This profitability metric is generally a key driver in the price of the stock, as it directly correlates to the profitability of the company as a whole.
We first looked for large cap technology stocks. Next, we then screened for businesses that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We then screened for businesses that have strong bottom line profitability (Net Margin [TTM]>10%)(1-year fiscal EPS Growth Rate>10%).
Do you think these large-cap stocks are worth more than their current valuations? Use this list as a starting-off point for your own analysis.
1) Citrix Systems, Inc. (NASDAQ:CTXS)
|Industry:||Business Software & Services|
Citrix Systems, Inc. has a Analysts' Rating of 2.10, a Net Margin of 15.21%, and a Earnings Per Share Growth Rate of 28.40%. The short interest was 1.02% as of 07/04/2012. Citrix Systems, Inc. designs, develops, and markets technology solutions to deliver information technology services on-demand worldwide. It offers desktop solutions, such as Citrix XenDesktop, an integrated desktop virtualization system; Citrix XenApp, an application virtualization solution; Citrix AppDNA, an application migration software; Citrix VDI-in-a-Box, a desktop virtualization solution; and Citrix XenClient, a bare-metal hypervisor that runs on the client device hardware. The company also provides datacenter and cloud solutions, such as Citrix NetScaler, a Web application delivery controller; Citrix Branch Repeater for branch and mobile users; Citrix Access Gateway, an SSL/VPN that delivers applications with policy-based SmartAccess control; Citrix XenServer, a server virtualization platform; Citrix CloudStack to build cloud computing environments; Citrix CloudGateway, a unified service broker; Citrix CloudBridge, a network solution; and Citrix CloudPortal to automate business and operations support services.
2) Cognizant Technology Solutions Corporation (NASDAQ:CTSH)
|Industry:||Business Software & Services|
Cognizant Technology Solutions Corporation has a Analysts' Rating of 1.80, a Net Margin of 14.22%, and a Earnings Per Share Growth Rate of 19.99%. The short interest was 1.96% as of 07/04/2012. Cognizant Technology Solutions Corporation provides information technology [IT], consulting, and business process outsourcing services in North America, Europe, and internationally. Its IT consulting and technology services include business and knowledge process consulting; IT strategy consulting; program management consulting; technology consulting; application design, development, integration, and re-engineering, such as complex custom systems development, data warehousing/business intelligence, customer relationship management [CRM] system implementation, and enterprise resource planning [ERP] system implementation; and software testing services. The company's outsourcing services comprise application maintenance, including custom application, CRM, and ERP maintenance; IT infrastructure outsourcing; and business and knowledge process outsourcing.
3) Applied Materials Inc. (NASDAQ:AMAT)
|Industry:||Semiconductor Equipment & Materials|
Applied Materials Inc. has a Analysts' Rating of 2.50, a Net Margin of 13.80%, and a Earnings Per Share Growth Rate of 108.26%. The short interest was 0.99% as of 07/04/2012. Applied Materials, Inc. provides manufacturing equipment, services, and software to the semiconductor, flat panel display, solar photovoltaic [PV], and related industries worldwide. The company's Silicon Systems Group segment offers a range of manufacturing equipment used to fabricate semiconductor chips or integrated circuits. This segment provides systems that perform primary processes used in chip fabrication, including atomic layer deposition, chemical vapor deposition, physical vapor deposition, electrochemical deposition, rapid thermal processing, chemical mechanical planarization, wet cleaning, and wafer metrology and inspection, as well as systems that etch or inspect circuit patterns on masks used in the photolithography process.
4) TELUS Corporation (NYSE:TU)
TELUS Corporation has a Analysts' Rating of 2.30, a Net Margin of 11.77%, and a Earnings Per Share Growth Rate of 14.35%. The short interest was 7.04% as of 07/04/2012. TELUS Corporation provides telecommunications products and services primarily in Canada. Its telecommunications products and services include wireless, data, Internet protocol [IP], voice, and television. The company operates through two segments, Wireless and Wireline.
5) Red Hat, Inc. (NYSE:RHT)
Red Hat, Inc. has a Analysts' Rating of 2.10, a Net Margin of 12.82%, and a Earnings Per Share Growth Rate of 36.61%. The short interest was 2.15% as of 07/04/2012. Red Hat, Inc. provides open source software solutions to enterprise customers worldwide. The company also offers enterprise-ready open source operating system platforms. Its products include Red Hat Enterprise Linux, an operating system designed for enterprise computing; Red Hat JBoss Middleware, which offers a range of middleware offerings for developing, deploying, and managing applications, such as hotel and airline reservation systems, online banking, credit card processing, securities trading, healthcare systems, customer and partner portals, retail and point-of-sale systems, and telecommunications network infrastructure that are accessible through the Internet, corporate intranets, extranets, clouds, and virtual private networks; and Red Hat Virtualization, a virtualization solution for server and desktop computers that combines the kernel-based virtual machine hypervisor with the oVirt open source virtualization management system.
6) Teradata Corporation (NYSE:TDC)
|Industry:||Diversified Computer Systems|
Teradata Corporation has a Analysts' Rating of 2.40, a Net Margin of 15.35%, and a Earnings Per Share Growth Rate of 16.25%. The short interest was 2.02% as of 07/04/2012. Teradata Corporation provides analytic data solutions worldwide. The company offers various data warehousing solutions that comprise software, hardware, and related business consulting and support services. Its solutions integrate an organization's departmental and enterprise-wide data about customers, financials, operations, and others into a single enterprise-wide data warehouse.
7) Symantec Corporation (NASDAQ:SYMC)
|Industry:||Security Software & Services|
Symantec Corporation has a Analysts' Rating of 2.20, a Net Margin of 17.41%, and a Earnings Per Share Growth Rate of 106.29%. The short interest was 1.50% as of 07/04/2012. Symantec Corporation provides security, storage, and systems management solutions to various organization and consumers worldwide. It operates in four segments: Consumer, Security and Compliance, Storage and Server Management, and Services. The Consumer segment provides Internet security for PCs, tablets, and mobile devices; services, such as online backup, online family protection, and remote help to individual users and home offices; and various free tools and services to consumers.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz and Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.