Despite the Fed raising interest rates twice this year, inflation in the United States reached a new high, prompting market fears about the Fed's upcoming rate rises being more aggressive. This raises the likelihood of the economy entering a recession. Given this backdrop, the interest-rate-sensitive technology industry is projected to witness extreme volatility in the coming days.
However, consumers' increasing reliance on technological products and solutions, remarkable innovations, and increased corporate and government expenditures in this domain should continue to drive the industry's growth.
Therefore, Wall Street analysts expect quality technology services stocks Information Services Group Inc. (III) and Issuer Direct Corporation (ISDR) to witness solid upside in the near term. So, they could be ideal picks now.
Information Services Group Inc. (III)
III and its subsidiaries operate as technology research and advising firm in the Americas, Europe, and the Asia Pacific. The firm provides digital transformation services like automation, cloud, and data analytics; sourcing advisory; managed governance and risk; network carrier; technology strategy and operations design; change management; and market intelligence and technology research and analysis.
This month, III received the North America Blue Prism Partner Innovation Award 2022. III was awarded for its expertise in developing and executing a unique, on-demand automation solution for customers in the banking and financial services industry utilizing Blue Prism software. The technology enables users to collect data and information across dozens of apps effectively.
III's revenues increased 9% year-over-year to $72.56 million in the first quarter ended March 31, 2022. Its operating income grew 54.2% from the year-ago value to $7.73 million. The company's net income increased 43.9% from the prior-year quarter to $4.93 million, while its EPS amounted to $0.10 over this period.
The company's EPS is expected to grow 16.7% year-over-year to $0.49 in fiscal 2023. Analysts expect III's revenue to increase 6.5% year-over-year to $295.92 million in fiscal 2022. Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters. The stock has gained 13.7% over the past year.
Each of the two Wall Street analysts that rated III rated it Buy. The 12-month median price target of $11.00 indicates a 65.2% potential upside.
III's POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
III is also rated an A for Sentiment and a B for Value and Quality. Within the C-rated Technology – Services industry, it is ranked #5 of 81 stocks.
To see additional POWR Ratings for Growth, Stability, and Momentum for III, click here.
Issuer Direct Corporation (ISDR)
ISDR provides shareholder communications and compliance platforms, technology, and services in the United States and overseas. Platform id is the company's flagship platform, which assists companies in managing events while attempting to send messages to important constituents, investors, markets, and regulatory systems.
During the first quarter ended March 31, 2022, ISDR's revenue increased 6.2% year-over-year to $5.29 million. Its operating income came in at $688 thousand. The company reported a net income of $516 thousand. Its EPS amounted to $0.13.
The consensus EPS estimate of $1.01 for fiscal 2022 represents a 5.2% improvement year-over-year. Analysts expect ISDR's revenue to increase 7.3% year-over-year to $23.48 billion in fiscal 2022.
The only Wall Street analysts that rated ISDR rated it Buy. The 12-month median price target of $33.00 indicates a 36.3% potential upside.
ISDR's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The stock also has an A grade for Sentiment and a B for Value and Quality. In the same industry, it is ranked #9 of 81 stocks.
In total, we rate ISDR on eight different levels. Beyond what we've stated above, we have also given ISDR grades for Stability, Momentum, and Growth. Get all the ISDR ratings here.
III shares were unchanged in premarket trading Wednesday. Year-to-date, III has declined -11.70%, versus a -19.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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