In the fast-paced realm of technology, some tech companies often fly under the radar. These companies are often undervalued and offer significant potential. Thus, we created this list of undervalued tech stocks.
While the mainstream tech stocks continue to dominate investor attention, particularly with the integration of advanced technologies such as artificial intelligence and machine learning, there are other companies quietly making substantial strides in their respective niches. These firms may not make daily news cycles. However, their technological innovations and strategic market positions enable them to offer unique value propositions.
With valuations that have not yet caught up to their growth trajectories, these under-the-radar tech stocks could be the sleeper hits of 2024. This provides both growth potential and a hedge against the volatility of their more famous counterparts.
As interest rates begin to stabilize and investor appetite for growth stocks returns, it’s an opportune time to consider these undervalued tech plays. They not only promise growth but also diversification away from the usual tech titans. Here’s a look at three such companies. These are well-poised for appreciation. They also offer a smart blend of innovation and value in a recovering market.
Himax Technologies (HIMX)
Himax Technologies (NASDAQ:HIMX) is primarily known for its display driver ICs and timing controllers. The company has experienced a dip in revenues and margins throughout 2023, a trend consistent with the broader industry downturn. However, the company’s resilient cash flow and robust dividend yield paint a promising picture for potential recovery and growth.
Himax reported a downturn in financial performance in 2023, with revenues falling 21% from the previous year. Despite these challenges, the company’s balance sheet remains strong. On their sheet, you’ll see $261 million in cash and equivalents and $453 million in short-term borrowings.
Himax holds a significant 40% share in the automotive display market. This segment continues to drive much of its revenue. Despite the decline in the broader market, Himax’s automotive sector remains a stronghold, contributing to nearly half of its sales. This is particularly important as the market for electric vehicles and advanced automotive displays is expected to grow. Furthermore, this offers Himax potential avenues for expansion and increased market share.
The company’s stock trades at a significant discount at 15.8x forward P/E, compared to the sector median of 29.6x.
ACM Research (ACMR)
ACM Research (NASDAQ:ACMR) has carved out a niche in the highly competitive semiconductor equipment sector with its advanced cleaning and plating technologies.
The company has established itself as a key player in the single-wafer wet cleaning equipment market. This technology is critical in the semiconductor manufacturing process, ensuring high yields and superior quality, which are crucial as devices become increasingly miniaturized and complex. ACMR’s flagship products, such as the Tahoe and TEBO cleaning systems, stand out for their efficiency and have been primary drivers of the company’s revenue growth.
The company reported a robust year with a 105% year-over-year (YoY) revenue increase in Q1 2024. With revenue primarily generated in Mainland China, ACM Research leverages the largest market for semiconductors, benefiting from the regional growth dynamics and government-backed initiatives to boost local production capabilities.
The company appears relatively undervalued compared to its peers. With a P/E ratio significantly lower than the industry average and an EV/EBITDA multiple that underscores its market potential, ACMR presents a compelling investment opportunity.
Jabil (JBL)
Jabil (NYSE:JBL) is a leading provider of worldwide manufacturing services and solutions. The company’s diversified business model spans across various high-demand sectors, including healthcare, automotive electronics, cloud computing, and, more recently, a focus on AI-driven data centers.
In the fiscal year 2023, Jabil reported revenues of $34.7 billion, marking a continuation of its revenue growth trend from $29.29 billion in 2021. This growth has been driven significantly by the Diversified Manufacturing Services segment, particularly through expansions in healthcare and automotive electronics.
Jabil’s unique position as a bridge between innovative technology solutions and global-scale manufacturing gives it a competitive edge. Its involvement in the production of cutting-edge devices, from 3D printers and biometric payment devices to telecommunications routers and smart home devices, underscores its integral role in the tech ecosystem.
The company’s stock appears undervalued compared to peers in the industry. JBL currently trades at a forward P/E of 10.5x, significantly lower than the sector median of 29.6x.
On the date of publication, Mohammed Saqib did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
