It’s no secret that technology stocks are darling assets for investors, offering rapid growth and market momentum. However, many shy away due to the high valuations associated with this sector.
With the sector’s substantial surge in the past year, these apprehensions are not unfounded. Nevertheless, opportunities for the discerning value investor do exist, as evidenced by three compelling stocks within the Zacks Computer and Technology sector – Qualcomm (QCOM), StoneCo (STNE), and OSI Systems (OSIS).
Qualcomm: Exploring Value and Growth
Qualcomm, currently ranked as a Buy, designs, manufactures, and markets digital wireless telecom products and services based on the Code Division Multiple Access (CDMA) technology.
Despite the tech sector’s notoriously high valuations, Qualcomm currently trades at a forward earnings multiple (F1) of 15.8X, significantly lower than both its five-year median and the sector average. Evidently, the stock offers value in a sector where such opportunities are typically scarce.
What’s more, Qualcomm provides a passive income stream, with shares presently yielding a respectable 2.2% annually, coupled with a 6.3% five-year annualized dividend growth rate.
Although Qualcomm’s performance has lagged behind the S&P 500 over the past year, the company’s operational prowess and future growth prospects present an enticing combination for investors seeking a blend of value and growth.
StoneCo: A Standout Growth Profile
StoneCo, earning a Strong Buy rating, offers an end-to-end cloud-based technology platform for electronic commerce. The company’s growth outlook is robust, with consensus expectations indicating 170% earnings growth for the current fiscal year along with a 10% sales uptick.
Remarkably, the stock’s current forward earnings multiple (F1) of 14.9X is notably lower than its five-year median and the Zacks sector average, making it an intriguing value proposition.
Exemplifying its growth trajectory, StoneCo’s shares have surged over 80% in the last year, fueled by better-than-expected quarterly results.
OSI Systems: Value Amidst Growth
OSI Systems, also holding a Buy rating, operates as a vertically integrated designer and manufacturer of specialized electronic systems and components for critical applications.
Despite the company’s anticipated growth, its current forward earnings multiple (F1) of 16.3X compares favorably to its five-year median and historical highs, signifying an attractive valuation.
Bolstering its appeal, OSI Systems’ shares have shown strong performance over the last year, appreciating nearly 45% and outperforming the S&P 500.
Bottom Line – The Sweet Spot of Value and Growth
For investors looking to strike a balance between value and growth in the tech sector, Qualcomm, StoneCo, and OSI Systems present compelling opportunities.
In addition, all three stocks hold a favorable Zacks Rank, indicative of analyst optimism.
Zacks Names #1 Semiconductor Stock
It’s only 1/9,000th the size of NVIDIA, whose stock price surged by over 800% since its recommendation. However, the new top chip stock has substantial room for growth.
With strong earnings growth and an expanding customer base, it’s well-positioned to cater to the soaring demand for Artificial Intelligence, Machine Learning, and Internet of Things. Forecasts project global semiconductor manufacturing to more than double from $452 billion in 2021 to $803 billion by 2028.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
