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Technology Services Industry Near-Term Prospects Bright
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Companies in the Zacks Technology Services industry are engaged in manufacturing, developing and designing of an array of software support, data processing, computing hardware and communications equipment. These include integrated powertrain technologies, advanced analytics, technology solutions and contract research services, semiconductor packaging and interconnect technologies, collaboration software, specialty printers, and data acquisition and analysis systems.
The industry includes consumer as well as business-oriented products and services. It comprises companies with diversified end-markets and customer base.
Here are the industry’s three major themes:
The industry continues to adopt and implement technologies like the Internet of Things (IoT) and edge computing, cloud, artificial intelligence (AI), blockchain and biometrics, advanced data analytics and machine learning. This trend should keep up the demand for the services.
Industry participants are increasingly opting for partnerships (both internal and external), mergers and acquisitions to expand into new markets and technologies. Industry players are also gearing up to assess global operations, which include supply chain, treasury, distribution, sales and marketing and finance, to function more effectively.
Trump’s stringent policies on immigration is limiting the industry’s growth prospects. Lack of skilled workers in the United States has been bothering industry participants for quite some time. This implies that companies should invest in training and educating their employees per the latest requirements. Further, service providers face security issues, regulatory hurdles and compliance-related issues due to operations across the globe.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Technology Services industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #83. This rank places it in the top 34% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and current valuation.
Industry Underperforms Sector and S&P 500
The Zacks Technology Services industry has underperformed the broader Zacks Business Services sector as well as the Zacks S&P 500 composite over the past year.
The industry has declined 17.2% over this period against 9.2% rally of the broader sector and 0.8% rise of the Zacks S&P 500 composite.
One-Year Price Performance
Industry’s Current Valuation
On the basis of EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), which is commonly used for valuing technology services stocks, the industry is currently trading at 11.87X compared with the S&P 500’s 10.48X and the sector’s 11.55X.
Over the past two years, the industry has traded as high as 12.92X, as low as 6.85X and at the median of 9.77X, as the charts below show.
EV-to-EBITDA
Bottom Line
Growth opportunities from emerging technologies and strategic business moves by industry participants to expand into new markets and technologies are likely to offset challenges arising from U.S. protectionism, global regulatory uncertainties and security issues.
We have zeroed in on four promising stocks from the Zacks Technology Services universe, which currently carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). All the four stocks have witnessed upward earnings estimate revisions in the past 60 days.
Blucora, Inc. : This Texas-based company provides technology-enabled financial solutions to consumers, small business owners, and tax professionals in the United States.
Currently, it has a Zacks Rank #1. The Zacks Consensus Estimate for current-year EPS has improved 8.9% in the past 60 days.
Price and Consensus: BCOR
TTEC Holdings, Inc. (TTEC - Free Report) : This Colorado-based company designs and provides customer experience solutions globally.
Currently, it carries a Zacks Rank #1. The Zacks Consensus Estimate for current-year EPS has increased 1.2% in the past 60 days.
Price and Consensus: TTEC
Jianpu Technology Inc : This China-based company provides online discovery and recommendation services for financial products in the People's Republic of China.
Currently, it carries a Zacks Rank #2. The Zacks Consensus Estimate for current-year EPS has improved significantly in the past 60 days.
Price and Consensus: JT
Thomson Reuters Corporation (TRI - Free Report) : This Canada-based company provides news and information-based tools to professionals worldwide.
Currently, it carries a Zacks Rank #2. The Zacks Consensus Estimate for current-year EPS has improved 0.9% in the past 60 days.
Price and Consensus: TRI
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Technology Services Industry Near-Term Prospects Bright
Companies in the Zacks Technology Services industry are engaged in manufacturing, developing and designing of an array of software support, data processing, computing hardware and communications equipment. These include integrated powertrain technologies, advanced analytics, technology solutions and contract research services, semiconductor packaging and interconnect technologies, collaboration software, specialty printers, and data acquisition and analysis systems.
The industry includes consumer as well as business-oriented products and services. It comprises companies with diversified end-markets and customer base.
Here are the industry’s three major themes:
Zacks Industry Rank Indicates Bright Prospects
The Zacks Technology Services industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #83. This rank places it in the top 34% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and current valuation.
Industry Underperforms Sector and S&P 500
The Zacks Technology Services industry has underperformed the broader Zacks Business Services sector as well as the Zacks S&P 500 composite over the past year.
The industry has declined 17.2% over this period against 9.2% rally of the broader sector and 0.8% rise of the Zacks S&P 500 composite.
One-Year Price Performance
Industry’s Current Valuation
On the basis of EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), which is commonly used for valuing technology services stocks, the industry is currently trading at 11.87X compared with the S&P 500’s 10.48X and the sector’s 11.55X.
Over the past two years, the industry has traded as high as 12.92X, as low as 6.85X and at the median of 9.77X, as the charts below show.
EV-to-EBITDA
Bottom Line
Growth opportunities from emerging technologies and strategic business moves by industry participants to expand into new markets and technologies are likely to offset challenges arising from U.S. protectionism, global regulatory uncertainties and security issues.
We have zeroed in on four promising stocks from the Zacks Technology Services universe, which currently carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). All the four stocks have witnessed upward earnings estimate revisions in the past 60 days.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Let’s take a look at the stocks.
Blucora, Inc. : This Texas-based company provides technology-enabled financial solutions to consumers, small business owners, and tax professionals in the United States.
Currently, it has a Zacks Rank #1. The Zacks Consensus Estimate for current-year EPS has improved 8.9% in the past 60 days.
Price and Consensus: BCOR
TTEC Holdings, Inc. (TTEC - Free Report) : This Colorado-based company designs and provides customer experience solutions globally.
Currently, it carries a Zacks Rank #1. The Zacks Consensus Estimate for current-year EPS has increased 1.2% in the past 60 days.
Price and Consensus: TTEC
Jianpu Technology Inc : This China-based company provides online discovery and recommendation services for financial products in the People's Republic of China.
Currently, it carries a Zacks Rank #2. The Zacks Consensus Estimate for current-year EPS has improved significantly in the past 60 days.
Price and Consensus: JT
Thomson Reuters Corporation (TRI - Free Report) : This Canada-based company provides news and information-based tools to professionals worldwide.
Currently, it carries a Zacks Rank #2. The Zacks Consensus Estimate for current-year EPS has improved 0.9% in the past 60 days.
Price and Consensus: TRI
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>