Deeply undervalued tech stocks are hard to find. Finding them requires that investors search for lesser-followed companies. Quite often, the under-the-radar stocks have low trading volume, are not well known in the markets and have a small market capitalization.
Such unknown stocks may have compelling value, so long as the market does not recognize the company’s growth potential or their dominance in a poorly understood sector.
With that in mind, here are three overlooked tech stocks investors should consider buying for big-time gains later down the line.
Tech Stocks to Buy: Super Micro Computer, Inc. (SMCI)
Super Micro Computer, Inc. (NASDAQ:SMCI), with a price-to-earnings ratio of 20.8X and a forward P/E of 11.5X, offers the industry an innumerable number of server and storage system solutions.
The server hardware chip refresh from Intel Corporation (NASDAQ:INTC), code-named “Skylake,” will drive sales for SMCI. The company began shipping X11 systems earlier this month. These solutions are special because of the number of memory, processor power and storage they support. For example, the X11 is powered by two Intel Xeon processors and allows for 24 DIMMs, along with all-flash NVMe for each node.
Besides servers, SMCI benefits from the growth in Internet of Things (IoT): 10.5% of its revenue in Q3 came from the IoT market. The addressable market for embedded is around $10 billion. So as the market grows, Super Micro Computer’s revenue mix will include more from this space.
Investors are familiar with Intel, but do not realize that the server computer providers like SMCI have the potential to grow in the quarters ahead.
Tech Stocks to Buy: Cray Inc. (CRAY)
Cray Inc. (NASDAQ:CRAY) is another supercomputer maker. The company reported first-quarter revenue of $59.03 million, but lost $0.71 per share.
Although the company started off the year with slow sales, management is confident that it is in a competitive position in the market. CRAY won a number of major contracts in the quarter. For example, it delivered a system solution to Laboratory Computing Resource Center at Argonne National Laboratory. It is expanding its market, a move that should drive revenues higher and deliver profits.
CRAY holds $285 million in cash or $7.08 per share. The company’s expenses are not growing, so higher sales will add positively to earnings.
Tech Stocks to Buy: Descartes Systems Group Inc (USA) (DSGX)
Descartes Systems Group Inc (USA) (NASDAQ:DSGX) is a trusted supplier of a global logistics network (“GLN”) infrastructure. For years, the company invested and made acquisitions to build this back-end platform. The investments are paying off. The company’s market capitalization is nearing $2 billion.
In the fourth quarter, Descartes Systems generated $72.6 million in cash from operations, up from $54.2 million from the previous year. Services revenue grew 11% year-over-year. This is a preferred type of revenue, due to the rich profit margins and its recurring nature. Overall, gross margins remained steady at 72%.
DSGX cash levels fell to $38.1 million, down around $2 million YOY due to acquisitions. The small but meaningful buyouts are clearly adding to the company’s revenue. 4Solutions is the company’s latest purchase, which brings Descartes an electronic document exchange network and entry in the Australian healthcare market.
As of this writing, Chris Lau did not hold a position in any of the aforementioned securities.