2 Cash-Rich Tech Stocks With Solid Growth Prospects

Includes: CSCO, DTLK, INVN
by: Bret Jensen

Cisco's (NASDAQ:CSCO) better than expected earnings should provide a solid foundation for the tech sector. Although the earnings upside was well-telegraphed, given the amount of analysts' upgrades recently, CSCO is up some 7% in early trading. Hoping to hop on board the positive sentiment in the sector, here are two tech stocks with solid growth prospects and cash rich balance sheets that look like they could go higher.

"InvenSense (NYSE:INVN) designs, develops, markets, and sells micro-electro-mechanical systems gyroscopes for motion tracking devices in consumer electronics." (Business description from Yahoo Finance).

Four reasons INVN is a solid growth play at just $14 a share:

  1. Earnings growth is very solid. InvenSense made 37 cents a share in FY2011 and is on track for 60 cents a share in FY2011. Analysts expect 81 cents a share in FY2013.
  2. Revenue growth is more impressive. The company had just $153mm in sales in FY2011, but should book more than $215mm in FY2012. Analysts project almost $290mm in revenue in FY2013.
  3. INVN has a solid balance sheet with $150mm, or about 15% of its market capitalization, in net cash on the books.
  4. The median price target for the 7 analysts that cover the stock is $20 a share, more than 40% above the current stock price.

"Datalink Corporation (NASDAQ:DTLK) engages in the design, installation, and support of data center solutions to mid and large-size companies." (Business description from Yahoo Finance).

Four reasons DTLK is a bargain at under $8 a share:

  1. The company has almost 20% of its market capitalization in net cash ($24mm)
  2. Datalink is on track to grow revenues by some 30% this year, and analysts expect double digit sales growth in FY2013 as well. The stock sports a tiny five year projected PEG of .35.
  3. The stock is cheap at just over 7 times forward earnings (under 6 subtracting cash) and just 32% of annual revenues.
  4. The median price target for the 5 analysts that cover the stock is $12.50 a share. Price targets range from $11 to $16 a share, all significantly above the current stock price.

Disclosure: I am long CSCO, DTLK.