5 Tech Buys Trading Under 10 Times Future Earnings

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Includes: AMAT, CSCO, DELL, GLW, WDC
by: Insider Monkey

Technology is a part of everyday life, so shouldn’t technology stocks be part of your portfolio? The problem is, what do you buy? Tech companies come and go (remember the dot-com bubble?) and people are distinctly faddish about the companies they favor. Sure, some technology companies are practically no-brainers – Apple (NASDAQ:AAPL) is popular and so is Microsoft (NASDAQ:MSFT). As long as those companies stay popular, their stocks will likely go up. Likewise, it doesn’t take a stock analyst to realize that smaller tech companies are riskier, but there are some that are worth the risk.

The companies on our list are large, with market caps between $12B and $100B, and they are undervalued, trading at less than 10 times their future earnings.

Cisco Systems Inc (NASDAQ:CSCO) designs, makes and sells Internet protocol (IP)-based networking products and the software that makes it all work. It opened trading on Tuesday, December 13 at $18.59 a share with a one-year target estimate of $21.10. In addition to the upside, CSCO also pays a 24 cents dividend (1.30% dividend yield). Right now, it is priced at 9.55 times its forward earnings. It has quarterly revenue growth of 4.70% and has boasted earnings growth of 4.17% per annum over the last five years. Analysts predict CSCO’s earnings growth rate will more than double to 8.38% over the next five years.

Dell Inc (DELL) is a company that manufactures, sells and services custom computers to consumers and businesses. In tandem with those offerings, DELL also sells third-party software and peripheral systems like printers, mice, keyboards and digital cameras. It opened trading on Tuesday, December 13 at $15.55 a share with a one-year target estimate of $17.64. Right now, DELL is priced at 7.67 times its forward earnings. Its quarterly revenue growth is almost even at -0.20%, but analysts predict DELL’s earnings growth rate will be close to 5% per annum for the next five years. At the end of the second quarter, Mason Hawkins’ Southeastern Asset Management had almost $2.5 billion invested in DELL.

Corning Inc (NYSE:GLW) manufactures specialty glass products but it also uses that expertise to create liquid crystal display (LCD) glass for flat panel displays. GLW also makes a range of fiber optic cable, equipment, products and components. It opened trading on Tuesday, December 13 at $13.56 a share with a one-year target estimate of $17.24. In addition to the upside, GLW also pays a 30 cents dividend (2.20% dividend yield). Right now, it is priced at 7.88 times its forward earnings. It has quarterly revenue growth of 29.50% and has boasted earnings growth of 11.22% per annum over the last five years. Analysts predict GLW’s earnings growth rate will continue near that pace, forecasting earnings growth of 11.00% per annum over the next five years.

Applied Materials Inc (NASDAQ:AMAT) provides equipment, services and software for flat panel displays, solar photovoltaic (PV), semiconductors and related industries. It opened trading on Tuesday, December 13 at $10.62 a share with a one-year target estimate of $13.13. In addition to the upside, AMAT also pays a 32 cents dividend (2.90% dividend yield). Right now, it is priced at 9.23 times its forward earnings. AMAT has a negative quarterly revenue growth of -24.50% and has had relatively level earnings growth of 0.12% per annum over the last five years. Analysts predict AMAT’s earnings growth rate will skyrocket to 8.67% over the next five years. Ken Fisher’s Fisher Asset Management is a fan. The fund had almost $525,000 in AMAT at the end of the the second quarter.

SanDisk Corp (SNDK) designs, manufactures and sells storage card products. In addition to the popular SanDisk (SD) cards, SNDK also makes and sells USB cards under the Cruzer brand and flash-based digital media players under the Sansa brand. SNDK opened trading on Tuesday, December 13 at $50.62 a share, with a one-year target estimate of $59.73. Right now, it is priced at 9.87 times its forward earnings. It has quarterly revenue growth of 14.80% and has boasted earnings growth of 28.66% per annum over the last five years. Analysts predict CSCO’s earnings growth rate will fall slightly to 17.44% per annum over the next five years, beating its industry expectations of 16.04%. John Griffin’s Blue Ridge Capital had over $192,000 in SNDK at the end of June.

Disclosure: I am long MSFT.