3 Under the Radar Small-Cap Tech Stocks to Buy on the Dip
Fresh restrictions imposed by several countries in response to the spread of the COVID-19 omicron variant have reinvigorated the adoption of advanced technology solutions to support remote lifestyles. Furthermore, increasing...
Fresh restrictions imposed by several countries in response to the spread of the COVID-19 omicron variant have reinvigorated the adoption of advanced technology solutions to support remote lifestyles. Furthermore, increasing consumer spending on technology products should also fuel the technology industry’s growth. Therefore, we believe recent price dips could be an opportune time to bet on fundamentally sound small-cap technology stocks Mitek Systems (MITK), Benefitfocus (BNFT), and Zedge (ZDGE). Let’s discuss these names.
With the emergence of the omicron COVID-19 variant, several companies have delayed their return to their offices. Experts have called for a return to remote working to contain the spread of the new variant. Because cloud computing and advanced technology solutions are prerequisites for remote working and lifestyles, the global technology industry should get a boost.
The Consumer Technology Association expects consumer spending on tech products and solutions during the 2021 holiday season to reach $142.5 billion. Furthermore, because companies across industries are investing significantly in tech upgrades to keep up with rapid digitalization, the tech sector should continue to thrive. Investors’ interest in the technology industry is evidenced by the iShares Global Tech ETF’s (IXN) 29.3% returns over the past year versus the SPDR S&P 500 ETF Trust’s (SPY) 22.8% gains.
Given this backdrop, we think it could be wise to bet on under-the-radar small-cap tech stocks Mitek Systems, Inc. (MITK), Benefitfocus, Inc. (BNFT), and Zedge, Inc. (ZDGE). They are currently trading below their 52-weeks highs and could witness significant upside in the coming months.
Mitek Systems, Inc. (MITK)
MITK in San Diego, Calif., is a software development company that provides digital identity verifications and solutions in the United States, Europe, Latin America, and internationally. Its products include Mobile Deposit, Mobile Verify, Mobile Fill, and CheckReader, which facilitate online user experiences, fraud detection and reduction, and compliant transactions. MITK has a market capitalization of $732.63 million.
In October, ID R&D, a MITK company that provides AI-based voice and face biometrics, launched IDLive Doc, a standalone document liveness detector. This fraud-fighting technology should tackle the problem of document screen replay attacks faced by the customers by quickly and effectively addressing the issue.
MITK’s total revenue increased 8.6% year-over-year to $33.27 million for its fiscal fourth quarter, ended September 30, 2021. The company’s operating income came in at $4.36 million. Also, its net income amounted to $2.24 million, and its EPS came in at $0.05 during the period.
Analysts expect MITK’s revenue for the fiscal year 2022 to be $138.2 million, representing 15.4% growth year-over-year. The company has an impressive earnings surprise history; it beat the consensus EPS in each of the trailing four quarters. Also, its EPS is expected to grow 17.1% in the current year. Its stock price has increased 39.5% over the past year. It is currently trading 28.8% below its 52-week high of $23.29, which it hit on September 2, 2021.
MITK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has a B for Growth, Value, and Quality. We have also graded MITK for Sentiment, Stability, and Momentum. Click here to access all MITK’s ratings. MITK is ranked #22 of 169 stocks in the Software - Application industry.
Benefitfocus, Inc. (BNFT)
With a market capitalization of $342.99 million, Charleston, S.C.-based BNFT provides cloud-based benefits management technology solutions for employers and health plans in the U.S. The company’s platform offers solutions to access benefits to support medical benefit plans, non-medical benefits, and financial wellness. In addition, BNFT provides implementation services to its customers to ensure seamless deployment and effective utilization of its solutions.
Last month, BNFT acquired Tango Health, a software and services company that offers Affordable Care Act (ACA) compliance and benefits decision-support solutions. The acquisition of Tango Health should enable BNFT to offer its customers a best-in-class ACA compliance and reporting solution.
During the third quarter, ended September 30, 2021, BNTF’s revenue came in at $62.03 million. The company’s gross profit amounted to $30.78 million. Its interest income increased 30% year-over-year to $52,000. Also, the company’s cash and cash equivalents came in at $12.59 million during the period.
BNFT has surpassed the consensus EPS estimates in three of the trailing four quarters. The company’s EPS is expected to increase 9.4% in the current year and 13.8% next year. It is trading 41.6% below its 52-week high of $17.58, which it hit on February 12, 2021.
BNFT’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. Also, the stock has a B for Value.
In addition to the POWR Rating grades I have just highlighted, one can see BNFT’s ratings for Growth, Stability, Momentum, Quality, and Sentiment here. The stock is ranked #17 in the Software - Application industry.
Zedge, Inc. (ZDGE)
Incorporated in 2008, New York City-based ZDGE is a digital publishing platform that offers Zedge a consumer-facing mobile personalization app. The company also provides a wide range of personalized wallpapers, video wallpapers, ringtones, notification sounds on Android, wallpapers, and ringtones on iOS. ZDGE has a market capitalization of $123.29 million.
In August, ZDGE acquired the leading authority on emojis, Emojipedia. ZDGE should diversify its portfolio, expand its value propositions, and make its app more attractive to the users with the help of Emojipedia’s emoji visualization symbols. Also, ZDGE’s users can enrich their quality content through this acquisition.
ZDGE’s total revenue increased 92.6% year-over-year to $5.2 million for its fiscal fourth quarter, ended July 31, 2021. The company’s operating income grew 450% from its year-ago value to $2.2 million. Its net income rose 400% from the prior-year quarter to $2.5 million. Also, the company’s EPS increased 325% year-over-year to $0.17.
Analysts expect ZDGE’s revenue for its fiscal year 2022 to be $24.37 million, representing 24.5% year-over-year growth. The company has an impressive earnings surprise history; it beat the consensus EPS in three of the trailing four quarters. The company’s EPS is expected to increase by 50% in the current quarter. ZDGE’s stock price has surged 135.4% over the past year. It is currently trading 56.9% below its 52-week high of $19.9, which it hit on June 17, 2021.
It is no surprise that ZDGE has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has an A grade for Sentiment and Quality and a B grade for Value.
MITK shares were unchanged in premarket trading Monday. Year-to-date, MITK has declined -6.69%, versus a 22.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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