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James Li
James Li
Articles (1393)  | Author's Website |

3 Undervalued Tech Stocks With High Financial Strength

Stocks have outperformed the S&P 500 over the past 6 months

According to the All-in-One Screener, a Premium feature of GuruFocus, three technology stocks that have high financial strength, outperformed the S&P 500 over the past six months and are undervalued based on the GuruFocus Value Line are Celestica Inc. (NYSE:CLS), iRobot Corp. (NASDAQ:IRBT) and Plexus Corp. (NASDAQ:PLXS).

The GF Value Line considers three factors: historical price multiples, an internal adjustment factor based on the company's past returns and growth and future estimates of business performance.

Dow slips as Intel drags down tech

On Friday, the Dow Jones Industrial Average closed at 28,335.57, down 28.09 points from Thursday's close of 28,363.66. Despite this, the 30-stock index was down over 200 points at the intraday low of 28,149.82.

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Shares of Intel Corp. (NASDAQ:INTC) sank over 10% on the heels of reporting a 10% decline in data-centric revenue, weighed down primarily due to Data Center Group's Enterprise and Government third-quarter segment revenue tumbling over 47% year over year following two quarters of over 30% growth. The coronavirus pandemic also weighed on Intel's internet of things and memory segments.

Tech shares were also pressured on concerns that a Democratic sweep on Nov. 3 could result in "higher taxes and tougher regulation" according to CNBC's comments from an analyst note from Bank of America Corp. (NYSE:BAC).

As such, investors may find opportunities in technology stocks that have outperformed the Standard & Poor's 500 index benchmark over the past six months, approximately the time since the World Health Organization declared Covid-19 a pandemic. According to its website, WHO made the pandemic declaration on March 11 and announced on April 4 that global cases reached 1 million. Global cases of the coronavirus have since topped 41.7 million as of Friday according to Johns Hopkins University Statistics.

Celestica

Shares of Celestica closed at $6.97, showing that they are modestly undervalued with a price-to-GF Value ratio of 0.79. The stock has outperformed the S&P 500 by approximately 32.63% over the past six months.

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The Toronto-based company provides a wide range of electronic manufacturing services, including design, engineering, testing and assembly. GuruFocus ranks the company's profitability 8 out of 10, driven by a moderately high Piotroski F-score of 5 and a 3.5-star business predictability rank.

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Gurus with holdings in Celestica include Donald Smith (Trades, Portfolio) & Co. and Brandes Investment.

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IRobot

Shares of iRobot closed at $84, showing that they are modestly undervalued with a price-to-GF Value ratio of 0.85. The stock has outperformed the S&P 500 benchmark by approximately 44.39% over the past six months.

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The Bedford, Massachusetts-based company designs and builds robots for mapping, navigation and home cleaning. GuruFocus ranks the company's financial strength 7 out of 10, driven by a strong Altman Z-score of 6.47 and debt ratios that outperform over 80% of global competitors.

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Other positive investing signs include a high Piotroski F-score of 7 and a four-star business predictability rank, contributing to a GuruFocus profitability rank of 9.

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Plexus

Shares of Plexus closed at $73.07, showing that they are fair but slightly undervalued with a price-to-GF Value ratio of 0.90. The stock has outperformed the S&P 500 benchmark by approximately 8.71% over the past six months.

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The Neenah, Wisconsin-based company provides a wide range of services, including the conceptualization, design and fulfillment of orders. GuruFocus ranks the company's financial strength 7 out of 10 on the back of a strong Altman Z-score of 3.75 and profitability of 8 out of 10, driven by a 3.5-star business predictability rank and returns that are outperforming over 73% of global competitors.

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Disclosure: Long Intel.

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About the author:

James Li
I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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