10 Tech Stocks Trading at Discounts

NEW YORK (TheStreet) -- Nanometrics (NANO), Nova Measuring Instruments (NVMI) and Teradyne (TER) are among technology stocks trading at attractive price-to-earning ratios relative to the Nasdaq.

They also may have substantial upside potential, based on consensus price targets of analysts.

The Nasdaq currently has a P/E of 23.

10. Nanometrics is a leading provider of advanced, high-performance process control metrology systems used in the fabrication of semiconductors, high-brightness LEDs, data storage devices, solar photovoltaics. It also has customers in the data storage industry.

Shares are trading at a P/E of 4.4.

Net revenue for the first quarter of 2011 was $62.1 million, up 67.2% from $37.2 million in the year-ago quarter as product revenue -- consisting of automated metrology, integrated systems and material characterization -- soared 89.1% year over year.

The company's gross margin increased by 130 basis points year over year to 56.6%, while the operating margin grew 1,150 basis points year over year to 27.5%.

Net income surged to $10.5 million, or 45 cents per share, from $5.9 million, or 26 cents per share, in the first quarter of 2010. Earnings topped analysts' estimates of 41 cents per share.

For the second quarter of 2011, the company expects revenue in the range of $62 million to $65 million, gross margin in the range of 54%-55% and operating margin in the range of 25%-27%. EPS is pegged at 41 cents to 47 cents.

Of the five analysts covering the stock, 60% rate it a buy, and the others rate it a hold. There are no sell ratings on the stock. On average, analysts have a $21 price target on the stock, implying upside of about 41%.

9. Amkor Technology ( AMKR) is a provider of outsourced semiconductor packaging (assembly) and test services. The package designs are application- and chip-specific, including the type of interconnection technology employed, size, thickness, and electrical, mechanical and thermal performance. The stock trades at a P/E of 7.24.

Net revenue for the first quarter of 2011 was $665 million, up 3% from $645.7 million in the year-ago quarter, driven by robust demand for products in its communications end-market, with notable strength in flip chip packages.

Gross margin narrowed 200 basis points year-over-year to 19%, while operating margin decreased 300 basis points to 7.5%.

Net income declined to $25.1 million, or 10 cents per share, from $44.3 million, or 18 cents per share, a year earlier. Analysts estimated earnings of 9 cents per share.

Going forward, the company expects second-quarter 2011 revenue in the range of $650 million to $700 million. Net income is estimated between $8 million and $37 million, or 4 cents to 15 cents per share.

Of the five analysts covering the stock, 60% rate it a buy, and the remainder rate it a hold. There are no sell ratings on the stock. On average, analysts expect shares to increase to $9.50, implying upside of about 51% from recent levels.

8. Teradyne designs, develops, manufactures and supplies automatic test equipment and solutions to the consumer electronics, automotive, computing, telecommunications, and aerospace and defense industries. The stock trades at a P/E of 8.63.

Consolidated revenue for the first quarter of 2011 increased 18.1% to $377.2 million from $319.3 million in the year-earlier period, driven by a 10% increase across all semiconductor test products to $29.6 million, and a 96% increase in the systems test group to $28.3 million. Bookings in the first quarter of 2011 rose 30% sequentially to $435 million, with $360 million in semiconductor test and $75 million in the systems test group.

Net income surged to $94.9 million, or 41 cents per share, from $50.1 million, or 24 cents per share. Analysts had forecast net income at 37 cents per share. At the end of March 2011, the company's liquidity position was strong, as reflected by cash and cash equivalents of $420.3 million and a current ratio of 3.8.

Guidance for the second quarter of 2011 is revenue of $375 million to $400 million, with non-GAAP income from continuing operations per diluted share of 38 cents to 44 cents, and GAAP income from continuing operations per diluted share of 28 cents to 34 cents.

Of the 15 analysts covering the stock, 67% rate it a buy, while 27% rate it a hold. On average, analysts have a $19.79 price target on the stock, implying upside of about 29% from recent levels. Analysts at Citigroup recently initiated coverage on the stock with a buy rating.

7. Amtech Systems ( ASYS) supplies horizontal diffusion furnace systems used for solar (photovoltaic) cell and semiconductor manufacturing. Within the solar market, it provides diffusion and automation equipment to solar cell manufacturers. In the semiconductor space, Amtech provides equipment to manufacturers of analog, power, automotive and microcontroller chips with geometries greater than 0.3 micron. The stock currently trades at a P/E of 8.78.

Total revenue for the second quarter of 2011 more than tripled, to $61.3 million from $16.1 million in the year-ago quarter, attributable to higher shipments to the solar industry, partially offset by an increase in the amount of revenue deferred. Net revenue from the solar market was $53.4 million, up 390% year over year. As of March 2011, the company's order backlog stood at $195.1 million compared to $87.2 million in the year-ago quarter. Moreover, new bookings were up more than 114% to $72.5 million as compared to $34 million in the year-ago quarter.

The company's gross margin increased 1,100 basis points to 40% from 29%, while operating margin improved to 20% from 3%. Net income multiplied to $7.5 million, or 77 cents per share, from $206,000, or 2 cents per share, during the second quarter of 2010. Analysts estimated earnings of 51 cents per share. Cash and cash equivalents at the end of March 2011 stood at $67.5 million.

Of the six analysts covering the stock, 67% rate it a buy, while the remainder rate it a hold. There are no sell ratings on the stock. On average, analysts expect shares to hit $29.30, up about 43% from recent levels.

6. DST Systems ( DST) provides sophisticated information processing and software services and products. It operates in two segments: financial services and output solutions. The stock currently trades at a P/E of 9.03.

Net revenue for the first quarter of 2011 was $591.7 million, vs. $566.7 million during the prior-year quarter. The financial services segment reported a $0.9 million revenue increase, while the output solutions group's operating revenue grew $18.9 million.

Non-GAAP earnings were $50.7 million, or $1.08 per share, compared with $53.8 million, or $1.11 per share, in the year-ago quarter. Analysts has estimated earnings of $1.03 per share. On the balance sheet front, cash and cash equivalents stood at $147.3 million, up 5.4% sequentially from $139.8 million.

Of the six analysts covering the stock, 83% rate it a buy. On average, analysts estimate shares to rise to $54, up about 16% from current levels.

5. TriQuint Semiconductor ( TQNT) supplies modules, components and foundry services to telecom companies. TriQuint offers different radio frequency (RF) and other intermediate frequency products that address three markets: handsets, networks and military systems. The stock is trading at a P/E of 9.3.

Net revenue for the first quarter of 2011 was $224.3 million, up 24% from $180.8 million in the year-ago quarter, riding on higher volumes of its 3G/4G products. Gross margin stood at 39%, up 110 basis points year over year, while operating margin grew 170 basis points to 9%. Non-GAAP net income stood at $26.1 million, or 15 cents per share, up 47% year over year. EPS matched analysts' estimates of 15 cents.

Revenue guidance for the second quarter of 2011 is in the range of $230 million to $240 million. The company is 86% booked to the midpoint of revenue guidance. Net income is pegged between 14 cents and 18 cents per share.

Of the 11 analysts covering the stock, 55% rate it a buy, and the remainder rate it a hold. There are no sell ratings on the stock. On average, analysts expect shares to reach $14.80, up about 24% from recent levels.

4. Nova Measuring Instruments designs, develops, produces and supplies integrated process control metrology systems to the global semiconductor industry, either directly or through process equipment manufacturers. The company's revenues grew at a compounded annual rate of 12.4% during the past five years. The stock trades at a P/E of 9.34.

Total revenue for the first quarter of 2011 surged 76% to $28.2 million from $16 million in the year-ago quarter. Gross margin expanded 680 basis points to 57.6%, while operating margin increased 1,080 basis points to 27.8%. As a result, net income rose to $8 million, or 30 cents per share, from $2.7 million, or 11 cents per share, in the comparable quarter of 2010. On the balance sheet side, cash and cash equivalents stood at $15 million, and the current ratio was 4.0. The company remains debt-free.

Guidance for the second quarter of 2011 shows revenue ranging between $28.5 million and $31 million with a net margin of 27% to 30%.

All the four analysts covering the stock rate it a buy. There are no sell ratings on the stock. On average, analysts expect shares to reach $13.56, up about 38% from recent levels.

3. Advanced Energy Industries ( AEIS) designs, manufactures and supplies industrial power conversion products. It also supplies gas flow control technology and thermal instrumentation products for control and detection of gases in the thin-film deposition process. The stock is trading at a PE of 9.36.

Revenue for the first quarter of 2011 came in at $137.6 million, up 97.5% from $69.7 million in the first quarter of the prior year. The Gross margin widened to 45.1% from 41.9% in the earlier year quarter. Similarly, the operating margin stood at 17.7%, compared with 8.4% in the year-ago quarter. The company reported net income of $18.9 million, or 43 cents per share, compared with $6.2 million, or 15 cents per share, a year before. Earnings topped analysts' estimates of 35 cents per share.

The company has cash and cash equivalents of $132.4 million, compared with $130.9 million in the previous quarter, and a current ratio of 3.98.

Of the 13 analysts covering the stock, 54% rate it a buy, while the remainder rate it a hold. There are no sell ratings on the stock. On average, analysts expect shares to reach $17.44, up about 21% from recent levels.

2. Synnex ( SNX) is a business process services company, servicing resellers, retailers and original equipment manufacturers (OEMs), across multiple geographies globally. The company operates in two segments: distribution services and global business services (GBS). The stock is trading at a P/E of 9.38.

Net revenue during the first quarter of 2011 rose 29% to $2.5 billion from the comparable quarter of 2010, driven by a 28.9% increase in distribution revenue and 50.5% increase in GBS revenue. Net income came in at $29.7 million, or 80 cents per share, compared with $34.7 million, or 98 cents per share, in the same quarter last year.

Cash and cash equivalents stood at $101.2 million, up 14.9% sequentially from $88 million, while the current ratio stood at 1.69.

Revenue guidance for the second quarter of 2011 is in the range of $2.44 billion to $2.56 billion. Net income, excluding direct anticipated acquisition and integration expenses, is expected in the range of $28.6 million to $29.9 million, or 77 cents to 81 cents per share.

Of the nine analysts covering the stock, 44% rate it a buy, while the remainder rate it a hold. There are no sell ratings on the stock. On average, analysts expect shares to reach $40.80, up about 28% from recent levels.

1. EarthLink ( ELNK) is a provider of Internet Protocol (IP) infrastructure and services to medium-sized and large businesses, enterprise customers, and over 1.5 million residential customers across the U.S. The stock trades at a P/E of 9.76.

Net revenue for the first quarter of 2011 was $243 million, up 55% from $157 million in the prior-year quarter following the acquisition of ITC Deltacom and STS Telecom. For the company's consumer segment, net subscriber losses were 79,000 in the first quarter, improving from the seasonally low fourth quarter of 2010 and from 114,000 in the year-ago quarter. Net income declined to $16.4 million, or 15 cents per share, from $26.7 million, or 25 cents per share, driven by higher operating costs and expenses. Analysts estimated earnings of 14 cents per share.

During the quarter, free cash flow stood at $52 million, while the company repurchased 2.1 million shares and paid dividends worth $6.2 million.

Going forward, the company expects 2011 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $305 million to $315 million; free cash flow of $175 million to $200 million; capital expenditures of $115 million to $130 million; and net income of $13 million to $20 million.

Of the five analysts covering the stock, four rate it a buy, and one rates it a hold. There are no sell ratings on the stock. On average, analysts expect shares to rise to $13.30, up about 73% from recent levels.

>>To see these stocks in action, visit the 10 Tech Stocks Trading at Discounts portfolio on Stockpickr.

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