Today, perhaps more than ever, technology companies draw the bulk of investors’ attention. With the likes of Facebook FB, Netflix NFLX, Amazon AMZN, and other giants garnering a large percentage of this focus, sometimes less well-known and younger tech companies are passed over or discounted altogether.
These young tech companies often operate in fields full of growth potential and could be poised to soar for years to come. However, these firms are rarely profitable out of the gate, and therefore, investors should look to a different valuation metrics—aside from the classic P/E ratio—to help determine what young technology companies might make cheap investments.
A more accurate representation of a new technology firm’s current value is often its price to sales ratio, as this metric helps to demonstrate if a company is generating a reasonable amount of revenue in relation to its share price. These younger companies are often forced to spend cash on growth opportunities, but a solid P/S ratio means that the sales are already there.
With that said, let’s take a look at three relatively new tech companies that might entice investors with their great Zacks Ranks and solid P/S ratios.
Sphere 3D Corp. ANY
Sphere 3D enables its clients to access their company’s data on any device and create private cloud networks within larger cloud systems. The cloud computing company aims to offer simplicity, ease, and enterprise-level security, all while helping reduce costs. Sphere 3D is currently a Zacks Rank #2 (Buy) stock.
On top of this, the company’s current price to sales ratio of 0.22 is remarkably lower than its industry’s average. What’s more, based on our current Zacks Consensus Estimates, Sphere 3D’s fourth-quarter sales are projected to jump 25%, while its full-year revenues are set to pop almost 13% to $86.1 million.
Aerohive Networks, Inc. HIVE
Aerohive Networks is also a cloud computing company—with a mobile focus—that hopes to “rapidly innovate and radically simplify wired and wireless networks at scale.” The company sells access points, switches, routers, and cloud-based network management solutions.
Aerohive Networks currently sports a 1.59 P/S ratio, which falls well under the 2.0 threshold that Zacks has determined to be the optimal range. The company is also currently a Zacks Rank #2 (Buy) and rocks a “B” grade for Growth in our Style Scores system. Furthermore, Aerohive’s’ EPS figures are set to skyrocket 91.67% next quarter as it closes in on profitability. And next year, the company’s revenues are set to climb over 9% to $171 million.
A10 Networks, Inc. ATEN
San Jose, California-headquartered A10 Networks is currently a Zack Rank #2 (Buy). The company operates in the “Communication – Network Software” industry where it works to help organizations secure and optimize their applications.
The application networking company’s current price to sales ratio is 2.15, which tops the S&P 500’s average and helps show that the young tech firm is headed in the right growth direction.
Along with its solid P/S ratio, A10 Networks scored an “A” for Growth in our Style Scores system. For the full-year, the company is set to see its revenues increase 4.39% to $240.10 million. However, perhaps, more importantly, A10 Networks is projected to post full-year earnings in 2017, after posting a loss a year ago.
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Sphere 3D Corp. (ANY) : Free Stock Analysis Report
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