Top Five Value Tech Stocks on the Market (Part 2)

After six years of an epic bull market, finding value isn’t exactly easy anymore. Stocks are pricey, to say the least. This fact rings especially true in heavy growth sectors such as technology.

For this reason, the analysts at Tech Investing Daily have put together a list of five technology companies we believe are still trading at reasonably low valuations.

Last week, we gave you the first two stocks on our list. Today, we’re revealing the final three.

If you missed our “Top Five Value Tech Stocks on the Market (Part One),” make sure to check it out.

For our final three picks, see below.

Value Tech Stock #3: Corning Inc. (NYSE: GLW)

Corning Inc. manufacturers high-quality ceramic and glass material for consumer and industrial applications. The company is well known for its incredibly durable Gorilla Glass product line, commonly found on the face of consumer devices such as smartphones and tablets.

Despite its near stranglehold on display in the consumer market, though, pigeonholing Corning as simply an iPhone and iPad supplier would be a big mistake. The company is actually very well diversified as a producer of various environmental materials, fiber-optic products, and other specialty materials.

From a pure value standpoint, Corning’s numbers are quite strong. Profit margins are very robust at 26%, cash significantly outweighs debt, and price-to-earnings remains at just 10.89 versus a competitor average of 15.34.

What we like most about Corning, though, is its ability to present both trailing value and future growth. The company has a solid history of product innovation and continues heavy work in R&D. It’s a constant innovator and will continue to expand its product line in the coming years.

One particular area of interest is the automotive market. Corning revealed back in February that it wants to put Gorilla Glass into automobiles and is already working with BMW to do so.

Considering the quantity of material required to outfit a vehicle compared to a six-inch mobile device, breaking into the automotive market would be a major boon for Corning. In fact, it has the potential to more than double the addressable market for the company.

According to Business Insider, the total glass opportunity in the automotive market is 5.5 billion square feet. For LCD screens in consumer electronics devices, the total is 4 billion square feet.

Penetrating the automotive market will take time. Forbes expects Corning to take three to four years before making an impact.

However, with Corning trading as cheap as it today, now wouldn’t be a terrible time to get in.

Value Tech Stock #4: Cisco Systems (NASDAQ: CSCO)

Cisco has been dominating the market for physical networking equipment such as switches and routers for some time now.

But Cisco wants to be even bigger, which is why the company is switching gears to a new strategy focused on the Internet of Things (IoT), or what it calls the Internet of Everything (IoE).

Simply defined, Cisco uses the IoE to refer to the idea of an increased connectivity between all objects. More so than perhaps any other company on the market, Cisco is banking on the promise that the Internet will transition from a primarily people-centered medium to also include non-human objects and machinery.

Cisco aims to play a major role in this revolution by connecting these objects through networking and data storage. The company is accomplishing this goal by dropping its consumer-based hardware and moving aggressively towards cloud computing.

Cisco recently acquired Cloupia, Meraki, and MaintenanceNet for cloud management, vCider and Cariden for networking, and BroadHop and OpenDNS for cloud programming and security. The prices for these firms were not cheap.

The transition has proven virtually seamless so far. The company has been able to quickly increase revenue in new markets while maintaining consistent streams from previously successful areas.

As for valuation, Cisco isn’t the cheapest company on our list, but it’s certainly at a fair price right now. The firm trades at a trailing P/E of 15.69 and a forward P/E of 11.81.

Profit margins are healthy at 18.3%. Earnings growth is currently 11.7%. The cash pile is large at $54.42 billion and $21.0 billion in debt. Cisco also provides a 3.1% dividend yield, which is relatively unique to this sector.

If you are looking for a solid blue-chip company to hold onto for the next two years, Cisco is a good bet.

Value Tech Stock #5: Taiwan Semiconductor Manufacturing (NYSE: TSM)

Taiwan Semiconductor (TSMC) is pretty much exactly what it sounds like: a pure-play semiconductor foundry headquartered in the Hsinchu Science and Industrial Park in Taiwan. The company’s factories are primarily located in Taiwan with further capacity in the U.S. and China.

TSMC fabricates semiconductors on behalf of other technology firms such as Intel, Texas Instruments, and Apple, and it has long been the largest manufacturer in the field. It currently produces over 16 million eight-inch wafers and generates $24.1 billion on an annual basis.

TSMC’s massive scale provides the company a significant advantage against other foundries. Its ability to deploy new chips in large amounts encourages adoption among companies rolling out products with intense demand.

Apple, for one, has long relied on TSMC as a supplier for its SoC, or system-on-a-chip technology. This relationship, which accounts for ~10% of TSMC’s revenue, is expected to continue with Apple’s newest A9 chip.

From a financial standpoint, TSMC looks incredibly strong. The company has grown revenue annually at an average rate of 20.9% over the last five years and is currently sitting on 52.6% sales growth quarter over quarter.

Profit margins are impressive at 38.6%, and the company has a positive cash position with $16.79 billion on hand and $7.48 billion in debt. TSMC also adds value with a 3.2% annual dividend yield — again, something you don’t see too often in the tech sector.

It’s also worth mentioning that TSMC, while already massive, still has significant room for growth in the Internet of Things (IoT) space. The company recently inked partnerships with multiple firms with the goal of optimizing IoT chips.

Experts predict that the Internet of Things will soon account for the largest device market in the world. The smartphone boon is what originally set TSMC off, doubling the company’s share price in just a few years. We believe the IoT could be even bigger.

Until next time,

Jason Stutman

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