- These are six of the most undervalued tech stocks to buy for June.
- Qualcomm (COMQ): A major US telecommunications chipmaker with a yield of 2.28% and a forward P/E of just 9.98 times.
- Nvidia (NVDA): This gaming and AI chip stock is trading for 30x forward earnings, below its 40x average.
- Jabil Inc. (JBL): This electronics maker has a PER of 7.6x, good earnings growth and a yield of 0.56%.
- Fidelity National Information Services (FIS): An enterprise software company with a forecast profit of 11.9x and growth of 14.5% with a dividend yield of 1.89%.
- Broadcom (AVGO): This chipmaker has a forward P/E of 14x, growth of 9% and a dividend yield of 3.0%.
- Silicon motion technology (SIMO): The flash maker is trading at 9.9x forward EPS, EPS growth of 12.6% and a dividend yield of 2.23%.
Bargain-hunting investors will want to take advantage of the rebounds in major tech stocks that were hit in May. Each of these stocks has a low price-to-earnings (P/E) ratio and they all pay dividends to their investors. However, analysts expect each of these undervalued tech stocks to generate higher earnings this year and next.
As a result, these stocks are not cheap due to lower earnings expectations. In fact, higher earnings forecasts reduce their forward PE multiples.
Additionally, a number of them also redeem their shares and/or have a history of annual dividend increases. this shows that 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 Information Services||$101.73|
|SIMO||Silicon motion technology||$88.91|
Market capitalization: $147.4 billion
Qualcomm (NASDAQ:COMQ) is a mobile technology company with a huge patent portfolio and high earning power. Analysts expect earnings per share (EPS) of $12.59 this year, up 47.4% from a year ago.
For next year, analysts estimate earnings 5% higher at $13.19. At its May 20 price, this gives QCOM a forward P/E ratio of just 9.98 times.
Additionally, the $3 per share dividend is less than a quarter of the $12.59 earnings forecast for this year. At today’s prices, it has a dividend yield of 2.28%.
Qualcomm has paid a dividend in each of the past 18 years. It is therefore very likely that the company will continue to do so even in the event of a recession. This makes it one of the best tech stocks to own with a low P/E ratio and good dividend yield.
Nvidia Corp (NVDA)
Market capitalization: $416 billion
Nvidia Corp. (NASDAQ:NVDA) is a graphics chip and artificial intelligence (AI) technology company. It’s cheap at only 30 times forward earnings. Additionally, his average PER over the past five years has been 40x.
Additionally, its earnings are expected to rise 27% from $4.44 EPS last year to $5.65 in 2022. And for 2023, 37 analysts surveyed by Refinitiv forecast average EPS of $6.74. This represents a forecast growth rate of 19.2% next year.
Based on my analysis, this offers upside potential of 30%. However, investors should also pay attention to the company’s upcoming results on May 25. They will want to see if Nvidia is still positive about its earnings growth. Given that analysts expect positive earnings for this year and next, that makes it one of the best undervalued tech stocks on this list.
Market capitalization: $8.1 billion
Jabil (NYSE:JBL) is a leading global producer of manufacturing services and solutions. Sales are expected to grow from $32.7 billion this year to $34.15 billion next year. Additionally, EPS is forecast at $7.24 this year, up 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. That makes it one of the most undervalued tech stocks right now.
Additionally, the company pays a dividend of 32 cents, giving it a modest yield of 0.56%. It has paid the same 8-cent quarterly dividend since 2011, so that’s unlikely to change just yet. However, he clearly has the leeway to do so.
Additionally, Jabil has been buying back its shares very aggressively over the past few years. It bought $613 million in the 12 months (LTM) ending February 2022. This represents 7.56% of its $8.1 billion value. Therefore, the company repays capital through a redemption yield of 7.6% rather than dividends. It’s much more tax efficient, as I’ve written about in the past.
Fidelity National Information Services (FIS)
Market capitalization: $60.9 billion
Fidelity National Information Services (NYSE:FIS) provides technology solutions to merchants, banks and capital markets firms. The company is producing good earnings growth, with an expected increase of 11.8% for this year and a growth rate of 14.5% for 2023. That’s when 33 analysts polled by Refinitiv predict that FIS stock will see EPS of $8.38.
At $99.68 as of May 20, FIS shares are trading for just 11.9 times expected 2023 earnings. Additionally, the company’s free cash flow (FCF) was $788 million during the quarter. Of March. This represents 22.6% of its turnover, a very high FCF margin. This is more than enough to cover both its dividends and its share buybacks.
Fidelity National’s $1.88 annual dividend produces a yield of 1.89% at its May 20 price of $99.68. It has been paying a dividend for 18 years and has increased it for the past 11 years. All of these factors make FIS one of the most undervalued tech stocks on this list.
Market capitalization: $221.8 billion
Broadcom (NASDAQ:AVGO) is a semiconductor and software design company. Earnings are expected to rise 26.8% this year and an expected 8.8% next year. Additionally, Broadcom’s expected 2023 EPS of $38.85 puts AVGO stock on a forward P/E of 14x to its May 20 price of $543.19 on May 20.
Additionally, the stock has a dividend yield of 3%. The company also produces huge FCFs, which it uses to buy back large amounts of its shares. This year, it could end up buying back more than $12.5 billion of its stock. This represents a redemption yield of 5.64% based on current market cap.
Overall, Broadcom’s low P/E and buyout yield make it one of the most undervalued tech stocks on this list.
Silicon Motion Technology (SIMO)
Market capitalization: $3.1 billion
Silicon motion technology (NASDAQ:SIMO) is a manufacturer of NAND flash drives and other solid-state memory devices, including laptop computers. Revenue is expected to increase 29.6% this year to $8.05 and increase 14.3% to $9.20 in 2023.
At $89.78 as of May 20, SIMO stock is showing 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 has increased it in each of the past six years.
Although it was not FCF positive last quarter, it produced $122 million in FCF over the past 12 months. This represented 12.4% of its $982 million in revenue over the past 12 months.
This also makes it one of the most undervalued tech stocks on this list.
As of the date of publication, Mark Hake did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.