Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
per week
for first 24 weeks

Enjoy unlimited digital access
Cancel Anytime
Enjoy Unlimited Digital Access
Get full access to
Just $1.99per week for the first 24weeks
Just $1.99per week for the first 24weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(}function setPanelState(o){dom.root.classList[o?"add":"remove"](,dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

What are we looking for?

Relatively undervalued stocks in the U.S. and Canadian tech sectors.

The screen

These are the metrics chosen for our filter, using the Eikon Screener application:

  • The Thomson Reuters Business Classification (TRBC), which allows us to identify top-performing sub-sectors within tech.
  • A market cap of more than US$4-billion, in order to include only companies that are past the early growth stages and established in the market.
  • A price-to-intrinsic value ratio less than 0.75. This means that the companies chosen are currently priced at 75 per cent or less of their fundamental value, which is calculated with the discounted cash flow model; this takes into account a company’s free cash flow and weighted average cost of capital.
  • The quick ratio, which is a measure of how well a company can meet its short-term financial liabilities. A minimum ratio of two is required, meaning that the companies’ value of current assets is at least twice that of current liabilities.

The companies that we find using the above filters will then be ranked by total cash flow from operating activities.

Story continues below advertisement

More about the Eikon Screener

The Screener is an application available within Thomson Reuters Eikon that allows an investor to filter a particular universe of stocks with hundreds of possible criteria. One may then rank the results according to one factor or several, and weigh this influence on the ranking accordingly. The Screener is a quick way to see the top performers in the universe, which can reflect the investor’s allocation strategy. It’s also easy to create templates so that one can review changes in ranking over time.

What we found

Our filter generated eight results, all of them U.S.-based. Five of the eight firms are in the semiconductor business, which has proven to be less volatile than other sub-sectors in the past. Those businesses can be considered the backbone of the industry in many respects; their cash flows are more regular and there has been a lot of consolidation between them.

The price-to-intrinsic value ratio is the most important metric in our search to find undervalued stocks. The intrinsic-value method used is based on operating cash flows and, cash being essential to any business, it proves to be a technique used frequently by investment banks to analyze businesses. Western Digital Corp. proved to be the best by far in that category.

A high quick ratio means a company will be able to survive without having to resort to more debt, at least for one more year. Broadcom (also the firm with the highest cash-flow ranking) comes first in our analysis.

Investors are encouraged to conduct further research before investing in any the companies shown here.

Select technology stocks

RankingCompanyTickerMarket Cap (US$Bil)TRBC Industry NameRecent Price (US$)12M ReturnDiv. YieldPrice/Intrinsic ValueQuick Ratio
1Broadcom Inc.AVGO-Q97.1Semiconductors234.747.56%3.0%0.705.68
2Qualcomm Inc.QCOM-Q79.6Comms. & Networking53.43-5.13%4.3%0.723.81
3Applied Materials Inc.AMAT-Q56.1Semicon. Equip./Testing53.0236.19%1.5%0.692.43
4Western Digital Corp.WDC-Q26.5Computer Hardware88.563.98%2.3%0.392.01
5Skyworks Solutions Inc.SWKS-Q17.6Semiconductors96.02-5.70%1.3%0.745.52
6Juniper Networks Inc.JNPR-N8.3Comms. & Networking24.10-13.53%3.0%0.712.35
7KLA-Tencor Corp.KLAC-Q16.4Semicon. Equip./Testing103.797.51%2.9%0.692.83
8Coherent Inc.COHR-Q4.3Semiconductors172.99-13.35%0.0%0.692.14

*Ranking by cash flow from operating activities; Source: Thomson Reuters Eikon

Guillaume Laframboise is a client specialist with Thomson Reuters.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to
Comments are closed

We have closed comments on this story for legal reasons or for abuse. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies