I've been yammering this week about valuations and how I've been looking for some hidden gems. I mentioned yesterday that, despite high PE ratios, Amazon (AMZN) actually looks rather cheap given that, in 2017-18, analysts expect the company to grow revenues and earnings by 20% and 70%, respectively.
Today, I've got three under-the-radar stocks with promising charts and attractive valuations.
Adesto Technologies (IOTS)
Adesto, an Internet of Things (IoT) play, makes memory products used in internet-connected devices across the consumer, industrial, medical and wearable markets. It sells products directly to manufacturers who use them in applications that require data-logging (such as fitness trackers) and extended battery life.
In its last quarter, IOTS reported that revenues increased 11.1% year over year to $11.3 million, with earnings coming in at $0.10 per share vs. estimates of a loss of $0.13 on $11.2 million. The company also gave revenue guidance of $12.8 million to $13.1 million for the second quarter vs. then-current estimates of $11.2 million.
Looking forward, analysts don't expect IOTS to turn a profit until 2018, but they anticipate sales will grow by 23% over the next four quarters, which gives the company a very attractive EV/S/G (or enterprise value to sales to growth) ratio of 7.3. Typically, I consider readings below 10 to be quite inexpensive.
Technically, IOTS is definitely on the thin side, but after a strong move off January lows, the stock has been building a base between $4.50 and $5 as it sets up for a possible upside move.
Axcelis Technologies (ACLS)
Axcelis makes equipment used by semiconductor manufacturers that is designed specifically for the key ion implantation phase of the wafer manufacturing process. Another Internet of Things play, the company recently introduced a new line of implanters, which it says will help put the company in a position to capitalize on the growing IoT and data storage markets.
In its last quarter, ACLS reported that revenues increased 28.7% year over year to $86.9 million, with earnings coming in at $0.29 per share vs. estimates of $0.22 on $80.2 million. The company also gave revenue guidance of $100 million for the second quarter vs. then-current estimates of $85 million, and saw EPS in the $0.30-$0.35 range, vs. a $0.27 estimate.
Over the next four quarters, analysts expect the company to grow top- and bottom-line results by 32.8% and 130.5%, respectively, which (given the current market price) gives the stock a surprisingly low forward PEG of 0.13 and an EV/S/G of 5.5.
Technically, ACLS made solid progress from January through early June before pulling back amid the recent tech hiccup. Recently, the stock has retaken its 50-day moving average, and a move over near-term resistance around $24 could attract attention.
InnerWorkings is a marketing company that uses its supplier network to streamline the creation, production and distribution of marketing and promotional materials, signage and displays, retail experiences, events and promotions and product packaging. Essentially, it procures marketing materials from suppliers and resells them to clients in a wide variety of industries.
In its last quarter, INWK reported that revenues fell 1.1% year over year to $267.4 million, with earnings coming in at $0.08 a share vs. estimates of $0.07 on $277.4 million. Over the next four quarters, analysts expect the company to grow top- and bottom-line results by 8.8% and 21%, respectively, which gives the stock an acceptable PEG of 1.1, but a low EV/S/G of 5.5. It's enterprise to sales ratio, meanwhile, is also quite low at 0.61.
Technically, INWK has been making steady upside progress since early 2016, and over the past several weeks, it's been developing a triangle just under resistance around $12.
-- Written by Jim Koford