With all of the technology companies on the market, it takes a keen eye to sort out those that stand out as good investments. To find tech stocks that have merit, we began our search by selecting those with impressive EPS growth projections. But growth is not everything. Another element we took into consideration for our list today was debt ratios. When a company is saddled by debt, it faces significant barriers to achieving the projected growth. For your review, we came up with a list of tech stocks that have EPS growth projections of 25% and higher for the next five years and have minimal debt.
The Long Term Debt/Equity Ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 5-Year Expected EPS Growth Rate is a long-term annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.
We first looked for technology stocks. We then looked for companies that have maintained a sound long-term capital structure (Long Term D/E Ratio < 0.1). We then looked for businesses that have expected earnings per share growth of more than 25 percent for the next five years (5-year projected EPS Growth Rate > 25%). We did not screen out any market caps.
Do you think these stocks are worth more than their current valuations? Use our list along with your own analysis.
1) Tangoe, Inc. (TNGO)
|Industry||Business Software & Services|
|Long Term Debt/Equity Ratio||0.00|
|5-Year Projected Earnings Per Share Growth Rate||39.30%|
Tangoe, Inc. provides communications lifecycle management software and services primarily to large and medium-sized businesses, and other organizations worldwide. The company offers an on-demand Communications Management Platform (CMP), which is a suite of software to manage and optimize the complex processes and expenses associated with the lifecycle of an enterprise's fixed and mobile communications assets and services, including planning and sourcing, procurement and provisioning, inventory and usage management, mobile device management, invoice processing, expense allocation and accounting, and asset decommissioning and disposal. It also provides strategic consulting and other services, including sourcing, strategic advise, bill auditing, inventory optimization, mobile optimization, and policy administration; and implementation services, which include data conversion, system configuration, and process review and corporate system integration services that assist customers in the setup and deployment of CMP. Tangoe markets and sells its solution directly and through indirect distribution channel partners. The company was formerly known as TelecomRFQ, Inc. and changed its name to Tangoe, Inc. in December 2001. Tangoe, Inc. was founded in 2000 and is headquartered in Orange, Connecticut.
2) Finisar Corp. (FNSR)
|Industry||Networking & Communication Devices|
|Long Term Debt/Equity Ratio||0.05|
|5-Year Projected Earnings Per Share Growth Rate||28.50%|
Finisar Corporation engages in the design, development, manufacture, and sale of optical subsystems and components for use in fiber optics-based data communication and telecommunication networks applications. Its optical subsystems primarily consist of transmitters, receivers, transceivers, transponders, and active optical cables principally based on the gigabit Ethernet, fiber channel, OTN, and SONET/SDH protocols that provide the fundamental optical-electrical or optoelectronic interface for interconnecting the electronic equipment used in building networks, including the switches, routers and servers used in wireline networks, as well as the antennas and base stations for wireless networks. The company also offers wavelength selective switches that are used to switch network traffic from one optical fiber to multiple other fibers without first converting to an electronic signal. Its optical components primarily consist of packaged lasers and photo detectors for data communication and telecommunication applications; and passive optical components for telecommunication applications. The company markets its optical products through its direct sales force, as well as through a network of distributors and manufacturers' representatives to the manufacturers of storage systems, networking equipment, and telecommunication equipment in the United States and internationally. Finisar Corporation was founded in 1987 and is headquartered in Sunnyvale, California.
3) 21Vianet Group, Inc. (VNET)
|Industry||Information Technology Services|
|Long Term Debt/Equity Ratio||0.04|
|5-Year Projected Earnings Per Share Growth Rate||31.50%|
21Vianet Group, Inc. provides carrier-neutral Internet data center services in the People's Republic of China. The company provides hosting and related services to house servers and networking equipment in its data centers, and connects them through a data transmission network; and other hosting related value-added services. Its hosting and related services include managed hosting services that offer data center space to house customers' servers and networking equipment and provide tailored server administration services; interconnectivity services that allow customers to connect their servers with Internet backbones in China and other networks through the company's border gateway protocol network, single-line and dual-line network, or multiple-line network; and value-added services comprising firewall services, server load balancing, data backup and recovery, data center management, server management, and backup server services. The company also provides traffic charts and analysis, gateway monitoring for servers, domain name system setup, defense mechanism against distributed denial of service attacks, basic setting of switches and routers, and virus protections. In addition, it offers managed network services to transmit data across the Internet through its hosting area network, which connects the servers housed in its data centers; BroadEx smart routing optimization platform that functions as an intelligent switchboard automatically selecting the routes and directing traffic through its own or others' networks; and data transmission network. As of December 31, 2011, the company operated 63 data centers located in 33 cities in China, which had approximately more than 7,816 cabinets. Its customers include Internet companies, blue-chip enterprises, and small- to mid-sized enterprises. The company was founded in 1999 and is headquartered in Beijing, the People's Republic of China.
4) Guidance Software, Inc. (GUID)
|Long Term Debt/Equity Ratio||0.01|
|5-Year Projected Earnings Per Share Growth Rate||40.60%|
Guidance Software, Inc. provides digital investigative solutions to government agencies and corporations primarily in the Americas, Europe, the Middle East, Africa, and Asia/the Pacific Rim. It offers EnCase platform for organizations to search, collect, and analyze electronically stored information to address human resources matters, litigation matters, allegations of fraud, suspicious network endpoint activity, and defend their data assets. The company's EnCase Enterprise software provides visibility into laptops, desktops, and file servers to conduct internal investigations and determine the root cause of suspicious network activity; and EnCase eDiscovery solution to automatically perform search, collection, preservation, and processing of electronically stored information from unstructured and semi-structured data stores. Its EnCase Cybersecurity forensic solution to expose, triage, and remediate threats, and to enforce data policy compliance on endpoints; EnCase Forensic computer investigation solution allows examiners to acquire data from various devices and unearth potential evidence, and craft reports on their findings; and EnCase Portable solution allows forensic professionals and non-experts to triage and collect digital evidence forensically. The company also offers hardware products, including write blockers, forensic duplicators, and storage devices; professional services, such as eDiscovery, network security incident response, civil/criminal digital investigation, and implementation services; and packaged services. It serves various industries, such as financial and insurance services, technology, defense contracting, telecom, pharmaceutical, healthcare, manufacturing, and retail. The company sells its software products and services primarily through its direct sales force; and hardware products principally through resellers. Guidance Software, Inc. was founded in 1997 and is headquartered in Pasadena, California.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/24/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.