The stock market suffered as a result of geopolitical issues, high inflation, rising interest rates, and the lingering impacts of the pandemic. Amid this, the tech sector experienced a massive selloff. However, the industry is predicted to thrive this year due to growing tech spending and the widespread adoption of digital technologies.
Therefore, investors could consider buying fundamentally strong, under-the-radar tech stocks Fuji Electric Co., Ltd. (FELTY) and Bel Fuse Inc. (BELFB), which are trading at affordable prices.
According to Gartner, global IT spending is expected to reach $4.50 trillion in 2023, a 2.4% rise from the last year.
Furthermore, the increased adoption of edge data centers is significantly driving the market growth. Demand for edge data centers is increasing due to an increase in cloud service adoption as well as a growth in the amount, accuracy, variety, and velocity of data generated by businesses. The IT services industry is expected to grow at a 5.6% CAGR until 2027.
The U.S. tech market accounts for 35% of the total world market and is expected to grow by 5.4% in 2023. The U.S. tech industry was estimated to reach a market value of $1.80 trillion by the end of 2022.
Investors’ interest in tech stocks is evident from the Technology Select Sector SPDR ETF’s (XLK) 21.4% returns over the past three months.
So, FELTY and BELFB could be worth owning now.
Fuji Electric Co., Ltd. (FELTY)
Headquartered in Tokyo, Japan, FELTY develops power semiconductors and electronics solutions in Japan and internationally.
FELTY’s forward EV/Sales of 0.83x is 48.2% lower than the industry average of 1.59x. Its forward Price/Sales multiple of 0.74 is 42.4% lower than the industry average of 1.29.
FELTY’s trailing-12-month asset turnover ratio of 0.89x is 11.7% higher than the 0.80x industry average. Its trailing-12-month ROTC of 8.08% is 16.1% higher than the 6.96% industry average.
FELTY’s net sales increased 11.4% year-over-year to ¥690.78 billion ($5.21 billion) for the nine months that ended December 31, 2022. Also, its operating income increased 29.9% year-over-year to ¥42.43 billion ($319.22 million). Its net income came in at ¥33.22 billion ($250 million), up 16.1% year-over-year.
FELTY’s revenue is expected to increase by 3.3% year-over-year to $7.79 billion in 2024. The stock has gained 7.7% over the past six months to close the last trading session at $9.91.
FELTY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade in Value and Momentum. The stock is ranked #2 out of 42 stocks in the Technology - Electronics industry. Click here to see the POWR Ratings of FELTY (Growth, Quality, Stability, and Sentiment).
Bel Fuse Inc. (BELFB)
BELFB designs, manufactures, markets, and sells products used in the networking, telecommunications, computing, general industrial, high-speed data transmission, military, commercial aerospace, transportation, and e-Mobility industries.
BELFB’s trailing-12-month EV/Sales of 0.84x is 70.2% lower than the industry average of 2.81x. Its trailing-12-month Price/Sales multiple of 0.74 is 73.2% lower than the industry average of 2.79.
BELFB’s trailing-12-month EBITDA margin of 12.96% is 32.5% higher than the 9.78% industry average. Its trailing-12-month net income margin of 8.05% is 197.4% higher than the 2.71% industry average.
For the fourth quarter that ended December 31, 2022, BELFB’s net sales increased 15% year-over-year to $169.20 million. Its gross profit came in at $52.51 million, up 33.7% year-over-year.
BELFB’s non-GAAP net earnings increased 99.2% year-over-year to $16.86 million. Its non-GAAP net earnings of $1.27 and $1.35 per Class A and Class B share, up 95.4% and 95.7% year-over-year, respectively.
The consensus revenue estimate of $661.5 million for the year ending 2024 represents a 5.3% increase year-over-year. Its EPS is expected to grow 3.7% year-over-year to $4.25 in 2024. It has surpassed EPS estimates in all four trailing quarters. The stock has gained 141.5% over the past nine months to close its last trading session at $37.58.
BELFB’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It has an A grade for Value and Sentiment and a B in Growth and Quality. It is ranked first in the same industry. To access additional ratings for BELFB’s Stability and Momentum, click here.
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FELTY shares were trading at $9.88 per share on Monday afternoon, down $0.03 (-0.27%). Year-to-date, FELTY has gained 5.22%, versus a 7.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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