The Zacks Computer – Integrated Systems industry comprises companies that provide advanced information technology solutions, including computer systems, software, storage systems and microelectronics.
Some of the industry participants also provide technological solutions (both products and services) to aid organizations connect, interact and transact with customers. There are others that develop and market information recognition and data entry software, systems and technologies.
The industry has benefited immensely from rise of more advanced forms of data management, rapid shift from traditional silos, increasing demand to integrate deployment techniques and modern application developments.
Some of the prominent industry players include Hewlett Packard Enterprise Company (HPE - Free Report) and International Business Machines Corporation (IBM - Free Report) .
Here are the three major industry themes:
- The industry is benefiting from rising demand for integrated solution across small, medium and large-scale enterprises and increasing investments in IoT, big data, AI and blockchain software technologies. Moreover, business analytics, cloud computing, mobile, security and social business present significant prospects.
- Additionally, growing adoption of multi-cloud model to achieve better scalability and attain improved resource utilization is also expanding the scope for industry participants. Rising technological advancements such as cloud and hardware/software virtual technologies are anticipated to favorably impact the industry. As growth and investment opportunities in developed countries continue to slow down, we believe that emerging economies will play a crucial role in the days ahead.
- Nevertheless, industry participants are facing challenges owing to the ongoing and heavily time-consuming business model transition to cloud. Moreover, spending across Data-Center Systems primarily due to component shortages like memory and CPUs and deceleration in hyperscale spending is likely to dampen prospects of the industry participants.
Zacks Industry Rank Indicates Encouraging Prospects
The Zacks Computer – Integrated Systems industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #110, which places it in the top 43% 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 continued outperformance in the near term. 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 valuation picture.
Industry Lags Sector and S&P 500
The Zacks Computer – Integrated Systems industry has underperformed the broader sector as well as the Zacks S&P 500 composite over the past year.
The industry has gained 12.3% over this period compared with the S&P 500 and the broader sector’s respective rally of 22.2% and 30.4%.
One-Year Price Performance
Industry’s Current Valuation
On the basis of trailing 12-month P/S, which is a commonly used multiple for valuing computer integrated systems stocks, we see that the industry is currently trading at 1.61X compared with the S&P 500’s 4.04X. It is also below the sector’s trailing 12-month P/S of 4.39X.
Over the past five years, the industry has traded as high as 2.39X and as low as 0.62X, with the median being at 1.52X, as the charts below shows.
Robust adoption of cloud computing, big data and shift from traditional silos will continue to drive the industry.
Here are a couple of stocks in the Zacks Computer – Integrated Systems industry that carry either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Agilysys (AGYS - Free Report) - Headquartered in Alpharetta, GA, this provider of innovative IT solutions to corporate and public-sector customers carries a Zacks Rank #1.
Notably, the Zacks Consensus Estimate for 2020 loss has narrowed from 42 cents per share to 36 cents per share over the past 30 days.
Price and Consensus: AGYS
International Business Machines - This Armonk, NY-based company has a Zacks Rank #2.
Notably, the Zacks Consensus Estimate for 2020 earnings has increased 1.1% to $13.36 per share over the past 30 days.
Price and Consensus: IBM