While macroeconomic concerns may impede near-term performance, the tech industry’s long-term prospects appear promising because of government efforts, increased digitization, and increasing dependence on technology in daily life.
So, it could be wise to add quality tech stocks Vishay Intertechnology, Inc. (VSH), Encore Wire Corporation (WIRE), and EchoStar Corporation (SATS) to one’s portfolio now.
According to Gartner, Inc., global government IT spending is expected to reach $589.80 billion in 2023, a 7.6% rise from 2022. Furthermore, Gartner predicts the global IT spending to hit $4.6 trillion in 2023, a 5.5% increase from 2022.
John-David Lovelock, Distinguished VP Analyst at Gartner, said, “Macroeconomic headwinds are not slowing digital transformation. IT spending will remain strong, even as many countries are projected to have near-flat gross domestic product (GDP) growth and high inflation in 2023. Prioritization will be critical as CIOs look to optimize spend while using digital technology to transform the company’s value proposition, revenue, and client interactions.”
According to Technavio’s recent market research analysis, the transparent electronics industry is expected to increase by $4.36 billion until 2027, at a CAGR of 30.7%.
Investors’ interest in tech stocks is evident from the iShares U.S. Technology ETF (IYW) 24.6% returns over the past three months and 29.6% returns over the past six months.
Vishay Intertechnology, Inc. (VSH)
VSH manufactures and supplies discrete semiconductors and passive electronic components in Asia, Europe, and the Americas. The company operates through six segments: Metal Oxide Semiconductor Field Effect Transistors (MOSFETs); Diodes; Optoelectronic Components; Resistors; Inductors; and Capacitors.
VSH’s forward EV/Sales multiple of 0.96 is 65.5% lower than the industry average of 2.78. Its forward Price/Book multiple of 1.63 is 57.9% lower than the industry average of 3.86.
VSH’s trailing-12-month ROCE of 22.10% is significantly higher than the industry average of 0.63%. Its trailing-12-month ROTA of 10.76% is significantly higher than the industry average of 0.08%.
VSH’s net revenues increased 2% year-over-year to $871.05 million in the fiscal 2023 first quarter that ended April 1. Its gross profit increased 7.6% from the year-ago value to $278.71 million. The company’s net earnings attributable increased 7.9% from the prior-year period to $111.78 million, while EPS increased 11.3% year-over-year to $0.79.
The consensus revenue estimate of $3.56 billion for the year ending December 2024 represents a marginal increase year-over-year. Its EPS is expected to come in at $2.66 for the same period. It surpassed EPS estimates in three of four trailing quarters. VSH’s shares have gained 32.2% over the past year to close the last trading session at $26.51.
VSH’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
VSH has an A grade for Value and a B for Momentum. It is ranked #4 out of 41 stocks in the Technology - Electronics industry. Click here for the additional POWR Ratings for Growth, Stability, Sentiment, and Quality for VSH.
Encore Wire Corporation (WIRE)
WIRE engages in the manufacture and sale of electrical building wires and cables in the United States.
WIRE’s forward EV/EBITDA multiple of 4.30 is 58.7% lower than the industry average of 10.41. Its forward EV/EBIT multiple of 4.56 is 68.7% lower than the industry average of 14.53.
WIRE’s trailing-12-month ROTC of 32.76% is 381.20% higher than the industry average of 6.81%. Its trailing-12-month ROTA of 33.85% is 568.03% higher than the industry average of 5.07%.
WIRE total current liabilities came in at $129.17 million for the period that ended March 31, 2023, compared to $144.16 million for the period that ended December 31, 2022. Also, its total long liabilities came in at $182.70 million, compared to $200.07 million for the same period.
Analysts expect WIRE’s revenue to increase 2.2% year-over-year to $2.90 billion in 2024. Its EPS is expected to come in at $20.03 in 2024. It surpassed EPS estimates in all four trailing quarters. The stock has gained 37.8% over the past year to close its last trading session at $170.69.
It’s no surprise that WIRE has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Value and a B for Quality. It is ranked #8 in the same industry.
Beyond what is stated above, we’ve also rated WIRE for Growth, Stability, Momentum, and Sentiment. Get all WIRE ratings here.
EchoStar Corporation (SATS)
SATS delivers networking technologies and services globally. Its Hughes segment offers broadband satellite technologies and internet products/services to consumer customers, while the EchoStar Satellite Services (ESS) segment provides satellite services to government service providers, content providers, and private enterprise customers.
On April 17, 2023, Hughes Network Systems, a SATS company, has made its Hughes Smart Network Edge software accessible for defense network operations. The program automates decision-making for the Department of Defense’s edge devices.
The success and acceptance of the software might result in higher income for the organization, as well as a competitive advantage in supplying new solutions for mission-critical communication.
SATS’ forward EV/EBITDA multiple of 2.66 is 68.5% lower than the industry average of 8.46. Its forward EV/Sales multiple of 0.78 is 55.50% lower than the industry average of 1.75.
SATS’ trailing-12-month net income margin of 5.92% is 110.7% higher than the industry average of 2.81%. Its trailing-12-month EBITDA margin of 30.25% is 68.5% higher than the industry average of 17.95%.
During the first quarter that ended March 31, 2023, SATS’ revenue from EchoStar Satellite Services increased 34% year-over-year to $6 million. Its cash and cash equivalents came in at $920.11 million for the period that ended March 31, 2023, compared to $704.54 million for the period that ended December 31, 2022.
Also, its current assets came in at $2.18 billion, compared to $2.13 billion for the same period.
Street expects SATS’ revenue to increase 7.1% year-over-year to $1.98 billion in 2024. Its EPS is expected to come in at $0.65 for the same period. BSET’s shares have gained marginally intraday to close the last trading session at $16.33.
SATS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #6 in the same industry. It has an A grade for Value and a B for Quality. To see additional SATS’ rating for Momentum, Sentiment, Stability and Growth, click here.
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VSH shares were trading at $26.51 per share on Monday morning, up $0.54 (+2.08%). Year-to-date, VSH has gained 23.48%, versus a 10.25% 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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