- These are six of the most undervalued technology stocks to buy for June.
- Qualcomm (QCOM): A major U.S. telecom chip designer with a 2.28% yield and a forward P/E of just 9.98 times.
- Nvidia (NVDA): This gaming and AI chip stock trades for 30 times forward earnings, below its 40x average.
- Jabil Inc (JBL): This electronics manufacturer has a 7.6x forward P/E, good earnings growth and a 0.56% yield.
- Fidelity National Info Services (FIS): An enterprise software company boasting 11.9x forward earnings and growing 14.5% with a 1.89% dividend yield.
- Broadcom (AVGO): This chip maker has a 14x forward P/E, 9% growth and a 3.0% dividend yield.
- Silicon Motion Technology (SIMO): The flash maker trades at 9.9x forward EPS, 12.6% EPS growth and a 2.23% dividend yield.
Bargain hunting investors will want to take advantage of rebounds in major tech stocks that have gotten hit in May. Each of these stocks has a low price-to-earnings (P/E) multiple, and they all pay dividends to their investors. However, analysts expect each of these undervalued tech stocks will have higher earnings this year and next year.
As a result, these stocks are not cheap due to falling earnings expectations. In fact, the higher earnings forecast lowers their forward P/E multiples.
Moreover, a number of them also repurchase their shares and/or have histories of annual dividend increases. that shows they are shareholder-friendly in addition to being cheap. With that, let’s dive in and look at these undervalued tech stocks.
|FIS||Fidelity National Info Services||$101.73|
|SIMO||Silicon Motion Technology||$88.91|
Market Cap: $147.4 billion
Qualcomm (NASDAQ:QCOM) is a mobile technology firm with a huge patent portfolio and high earnings power. Analysts forecast $12.59 in earnings per share (EPS) this year, up 47.4% over last year.
For next year, analysts estimate 5% higher earnings at $13.19. At its May 20 price, this gives QCOM a forward P/E ratio of just 9.98 times.
Moreover, the dividend of $3 per share is less than a quarter of the $12.59 earnings forecast for this year. At today’s price, it has a 2.28% dividend yield.
Qualcomm has paid a dividend in each of the past 18 years. This makes it very likely the company will keep doing this even if there is a recession. This makes it one of the best tech stocks to own with a low P/E ratio and a good dividend yield.
Nvidia Corp (NVDA)
Market Cap: $416 billion
Nvidia Corp (NASDAQ:NVDA) is a graphics chip and artificial intelligence (AI) technology company. It is cheap at just 30 times forward earnings. Moreover, its average forward P/E over the past five years has been 40x.
Moreover, its earnings are forecast to rise 27% from $4.44 in EPS last year to $5.65 in 2022. And for 2023, 37 analysts surveyed by Refinitiv forecast an average EPS of $6.74. This represents a forward growth rate of 19.2% next year.
Based on my analysis, this provides a potential 30% upside. However, investors should also pay attention to the company’s upcoming May 25 earnings results. They will want to see if Nvidia is still positive on its earnings growth. Given that analysts expect positive earnings for this year and next, this makes it one of the best of the undervalued tech stocks on this list.
Market Cap: $8.1 billion
Jabil (NYSE:JBL) is a major producer of global manufacturing services and solutions. Sales are forecast to grow from $32.7 billion this year to $34.15 billion next year. In addition, EPS is forecast at $7.24 this year, rising 5% to $7.60 this year.
At $57.45 on May 20, Jabil had a forward P/E of 7.6 times forward earnings for 2023. This makes it one of the most undervalued tech stocks out there right now.
Moreover, the company pays a dividend of 32 cents, which gives it a modest yield of 0.56%. It has paid the same quarterly 8-cent dividend since 2011, so it’s probably not likely to change that for now. However, it clearly has the room to do so.
Additionally, Jabil has been buying back its stock very aggressively over the past several years. It bought $613 million in the 12 months (LTM) ending Feb. 2022. That represents 7.56% of its $8.1 billion value. Therefore, the company returns capital through a 7.6% buyback yield rather than dividends. This is much more tax efficient, as I have written about in the past.
Fidelity National Information Services (FIS)
Market Cap: $60.9 billion
Fidelity National Information Services (NYSE:FIS) provides technology solutions for merchants, banks, and capital markets firms. The company produces good earnings growth, with an 11.8% increase forecast for this year and a 14.5% growth rate for 2023. That is when 33 analysts surveyed by Refinitiv predict FIS stock will see EPS of $8.38.
At $99.68 as of May 20, FIS stock trades for just 11.9x forecast 2023 earnings. Moreover, the company’s free cash flow (FCF) was $788 million in the March quarter. That represents 22.6% of its revenue, a very high FCF margin. This is more than enough to cover both its dividends and its share buyback purchases.
Fidelity National’s $1.88 annual dividend produces a 1.89% yield at its May 20 price of $99.68. It has paid a dividend for 18 years and has raised it in the past 11 years. All these factors make FIS one of the best undervalued tech stocks on this list.
Market Cap: $221.8 billion
Broadcom (NASDAQ:AVGO) is a semiconductor design and software company. Earnings are forecast to grow 26.8% this year and 8.8% forecast for next year. Moreover, Broadcom’s expected 2023 EPS of $38.85 puts AVGO stock on a forward P/E of 14 times at its May 20 price of $543.19 on May 20.
In addition, the stock has a dividend yield of 3%. The company also produces huge FCF, which it uses to buy back large amounts of its shares. This year, it could end up repurchasing more than $12.5 billion of its shares. That represents a 5.64% buyback yield based on today’s market cap.
Overall, Broadcom’s low P/E and buyback yield makes it one of the top undervalued tech stocks on this list.
Silicon Motion Technology (SIMO)
Market Cap: $3.1 billion
Silicon Motion Technology (NASDAQ:SIMO) is a maker of NAND flash drives and other solid-state memory devices including on laptops. Earnings are forecast to rise 29.6% this year to $8.05 and increase by 14.3% to $9.20 in 2023.
At $89.78 as of May 20, SIMO stock is on a forward P/E of just 9.4x for next year. Given that it also pays a dividend of $2 per share, its yield is attractive at 2.23%. It has paid a dividend for nine years and raised it in each of the past six years.
Although it was not FCF positive in the latest quarter, in the last 12 months it produced $122 million in FCF. That represented 12.4% of its $982 million in revenue over the last 12 months.
This also makes it one of the top undervalued tech stocks on this list.
On the date of publication, Mark Hake 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.