The tech sector witnessed significant growth driven by the pandemic-induced digital transformation across industries and increased demand for cloud-based solutions. Looking at 2022 and beyond, the sector is expected to be supported by the increased embracement of cloud and service-based IT and the popularity of a hybrid workforce.

The technology industry is set to exceed $5.30 trillion in 2022, growing 5%-6% year-over-year. Moreover, a study of U.S. statewide budgets shows heavy spending on tech over the next several years. The budgets contain funding allocations for several types of technology.

Although the technology sector faced a massive sell-off this year, it seems to be regaining investors’ confidence, as evident from the Technology Select Sector SPDR Fund’s (XLK) 15.7% returns over the past month, outpacing the broader SPDR S&P 500 ETF Trust’s (SPY) 8.6% gains.

Given this backdrop, fundamentally strong tech stocks Information Services Group, Inc. (III), Celestica Inc. (CLS), Computer Task Group, Incorporated (CTG), and Extreme Networks, Inc. (EXTR) might be ideal investments now. These stocks are currently trading under $15.

Information Services Group, Inc. (III)

III is a technology research and advisory company operating in the Americas, Europe, and the Asia-Pacific. The company’s offerings include digital transformation services, sourcing advisory, market intelligence, technology research, and analysis services.

In June, III announced that it had been awarded a three-year $10 million agreement by the Italian government to help manage and oversee the government’s digital transformation program. “This is a significant win for ISG, underscoring our strong track record of supporting digital modernization efforts for our clients,” said Michael P. Connors, chairman, and CEO of III.

III’s revenues increased 9% year-over-year to $ 72.56 million in the first quarter ended March 31. Its operating income grew 54.2% from the year-ago value to $7.73 million, while its adjusted net income improved 16.8% year-over-year to $6.38 million. The company’s adjusted EPS increased 20% from its year-ago value to $0.12.

The consensus revenue estimate of $317.44 million for the fiscal year 2023 indicates a 7.3% increase year-over-year. The consensus EPS estimate for the same year of $0.49 reflects a rise of 15.3% year-over-year. Moreover, III has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters.

The stock has gained 27.9% over the past year and 18.6% over the past three months to close its last trading session at $7.39.

III’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

III is rated a B in Value, Sentiment, and Quality. Within the Technology - Services industry, it is ranked #4 of 81 stocks.

To see additional POWR Ratings for Growth, Momentum, and Stability for III, click here.

Celestica Inc. (CLS)

CLS, headquartered in Toronto, Canada, offers a hardware platform and supply chain solutions. It operates through two broad segments, Advanced Technology Solutions; and Connectivity & Cloud Solutions. The company serves the aerospace, defense, industrial, energy, and health-tech industries.

On August 2, CLS launched its new generation of flash and storage arrays. The products are expected to deliver flexibility and custom options for applications on-premises or in public clouds and should bolster the company’s revenue.

CLS’ revenue increased 20.9% year-over-year to $1.72 billion in the second quarter ended June 30. Its non-IFRS adjusted gross profit improved 30% from the prior-year period to $155.20 million. Non-IFRS adjusted net earnings improved 43% from the same period last year to $54.20 million, while the company’s non-IFRS adjusted EPS increased 46.7% from its year-ago value to $0.44.

The consensus revenue estimate of $1.73 billion for the fiscal third quarter (ending September 2022) reflects a 17.9% increase year-over-year. The consensus EPS estimate for the same period of $0.45 indicates a 27.5% improvement year-over-year. The company has surpassed consensus EPS estimates in each of the trailing four quarters, which is impressive.

The stock has gained 25.8% over the past year to close its last trading session at $10.96. The stock has gained 13.8% over the past month.

CLS has an overall A grade, equating to a Strong Buy in our proprietary rating system.

CLS is rated a B in Growth, Value, and Sentiment. Within the Technology - Services industry, it is ranked #2.

To see additional POWR Rating for Momentum, Stability, and Quality for CLS, click here.

Computer Task Group, Incorporated (CTG)

CTG offers information and technology services in North America, South America, Western Europe, and India.  The company operates through three segments, North America IT Solutions and Services; Europe IT Solutions and Services; and Non-Strategic Technology Services.

In the second quarter ended June 30, CTG’s non-GAAP operating income increased 16.8% year-over-year to $6.92 million, while its non-GAAP net income came in at $3.46 million, up 15.4% year-over-year. The company’s non-GAAP EPS improved 15.4% from the prior-year period to $0.15.

Analysts expect CTG’s revenue for the third quarter ending September 2022 to be $84.50 million. The company’s EPS is expected to increase 15.4% from the prior-year period to $0.15 for the same quarter. The company has surpassed consensus EPS estimates in three out of the trailing four quarters.

 CTG has gained 2.4% over the past month and 1.8% over the past year to close its last trading session at $8.59.

It is no surprise that CTG has an overall A rating, which translates to Strong Buy in our POWR Rating system.

The stock has an A grade for Value and a B for Stability, Sentiment, and Quality. It is ranked #3 in the Technology - Services industry.

Beyond what we’ve stated above, we have also given CTG grades for Growth and Momentum. Get all the CTG ratings here.

Extreme Networks, Inc. (EXTR)

EXTR operates as a software-driven networking solutions provider that designs, develops, and manufactures wired and wireless network infrastructure equipment and develops software for network management.

In June, the company introduced a suite of new solutions, extending its ExtremeCloud portfolio to include new SD-WAN and AIOps with digital twin capabilities. The new suite of solutions might add to the company’s topline.

In May, the company announced an increase in its share repurchase authorization to $200 million over a three-year period from July 1. This is expected to enhance EXTR’s shareholder returns.

In the fourth fiscal quarter ended June 30, EXTR’s total net revenue came in at $278.20 million, up 0.4% year-over-year. The company’s total non-GAAP free cash flow increased 14.6% from the prior-year period to $59.82 million. The company’s non-GAAP EPS amounted to $0.15.

Street expects EXTR’ revenue for the fiscal year 2023 (ending June 2023) to be $1.23 billion, indicating an increase of 10.6% year-over-year. For the same year, Street expects EPS to improve 26.8% from the prior year to $0.98. EXTR has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.

EXTR has gained 25.9% over the past year and 53.1% over the past month to close its last trading session at $13.70.

It is no surprise that EXTR has an overall A rating, which translates to Strong Buy in our POWR Rating system.

Beyond what we’ve stated above, we have also given EXTR grades for Momentum, Stability, and Sentiment. Get all the EXTR ratings here.

III shares were trading at $7.64 per share on Friday afternoon, up $0.25 (+3.38%). Year-to-date, III has gained 1.30%, versus a -12.59% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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