Undervalued technology stocks gaining market attention- PRO, AND

Key Takeaways:

• The technology sector has a key role to play amid the existing working environment and the age of digitisation.
• Australia is making significant progress in the technology sector.
• Experts believe that the technology sector will boom in 2022.

The technology sector was amongst the top-performing sector during the pandemic period in 2020. However, since last 1 year, the sector has delivered a negative return. S&P/ASX 200 Information Technology sector delivered a return of -8.86%.

When the pandemic started in 2020, people switched to the online working environment. However, in 2021, many supply chains struggled. Players from the technology space had to re-assess where and how manufacturing would happen. As a result, it was important for many businesses from the technology space to re-orient and reskill their people to optimize remote working capabilities and take advantage of advanced technologies like Artificial Intelligence. Another probable reason that influenced the technology sector was that many investors tried to book profit by selling stocks from this sector.

As per Refinitiv, the technology index’s forward PE Ratio for the upcoming 1 year is projected to be 49.13x. Thus, indicating that in the upcoming 12 months, the stocks within this sector may boom. Also, making the sector attractive in the coming period.

Progress in Australia in technology sector:

Considering the challenges faced during 2021, significant progress is being made in the technology space. Many financial market participants are making use of various innovative market solutions to transform corporate actions processing. In the next 3 years, it is expected that 48% of the market plans to make changes in their data sourcing. Priority would be given to hiring, implementing robotics, deploying data cleansing platforms, adopting new technology platforms, etc.

Based on the positive technology sector outlook, we have included two undervalued stocks with the potential to grow in the coming period.

Prophecy International Holdings Limited (ASX: PRO)

ASX-listed Prophecy International Holdings Limited (ASX: PRO) is globally known for its innovative software. The Company is in the business of designing and developing software. The Company has developed a 40-year track record serving clients to safeguard the enterprise, prevent cyber threats, and provide valuable business insights. Further, it assists companies to make better decisions quicker to safeguard and improve their operations.

On a TTM basis, the stock has a price to book value of 5.5x, significantly below the technology sector value of 32x. Thus, indicating that the stock is undervalued.

In 1H FY2022, the Company reported an increase in the revenue by 21% to AU$7.6 million. Invoicing increased 40% to AU$9.51 million and Group annualised recurring revenue by 57% to AU$15.5 million. By the end of 1H FY2022, the Company had net cash of AU$10.8 million along with advance/deferred income of AU$5.9 million with zero debt.

Outlook:

• In cloud migration, eMite is riding a substantial growth trend. The Company expects that COVID-19 will speed up cloud migration for the subsequent numerous years as enterprise customers pursue to enable working from home.
• PRO aims to deliver new capabilities, accelerating Snare as well as eMite product roadmaps as it develops new sources of revenue to complement existing products.
• It will continue its transition towards SaaS & subscription as it focuses on driving organic growth via renewal, retention, upsell and cross-sell. At the same time, it would explore the Australian market for possible M&A opportunities.
• Its eMite continues to evolve and is currently vendor-agnostic. Thus, letting PRO gain scale via indirect sources. In the coming period, PRO will add vendor partnerships just like Genesys and Amazon. For Snare, the objective would be to expand MSSP partnerships beyond the US to EMEA & APAC.
• Other areas to focus on include increasing R&D sales or Snare & eMite in Australia & Manila, growing sales & marketing for eMite in Denver, USA, and increasing support to meet increased customer numbers.

ALSO READ: All you need to know about Cloud Computing

 Ansarada Group Limited (ASX: AND)

Ansarada Group is a SaaS platform that companies, advisors, and governments depend on for securely managing critical data, workflow, and collaboration in high-stakes processes like deals, tenders, risk, compliance, board governance, and tenders.

On a TTM basis, AND has a price to book value of 3.5x, which is much below the technology sector value of 32x. Thus, indicating that the stock is undervalued.

On 16 March 2022, the Company announced that Microsoft for Startups global program partnered with Ansarada to see AND’s suite of solutions offered to each member in the program with the partnership’s initial period through June 2025. Microsoft for Startups and Ansarada are coming together to make it simpler and quicker for start-ups to raise capital and grow.

1H FY2022 Highlights:

• Total revenue increased 52% to AU$23.4 million compared to the previous corresponding period.

• The number of customers increased 21% to 3,670 YoY.
• Cash flow was positive. It noted strong cash flow from operations AU$6.7 million, which was AU$1.2 million in 1H FY21.
• Ansarada has no debt and has a cash balance of AU$21 million ending 31 December 2021.

Outlook:

In FY2022, the Company’s objective is to strengthen the product, processes as well as people bases for extremely scalable profitable growth from varied revenue sources that are continually in demand regardless of economic cycles. It would focus on executing a growth strategy that would help to achieve record results.

Stock Information:

What next?

Based on the positive outlook of the technology sector and the progress made by the above companies in the recent past, it would be interesting to see how these players perform in the coming days.

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