2 Underappreciated Tech Stocks for 2021

Tech stocks like Open Text (TSX:OTEX)(NASDAQ:OTEX) are still undervalued.

| More on:

Tech stocks had an incredible year in 2020 and are now sliding lower in 2021. The sentiment has clearly shifted. That creates an opportunity for investors to finally get in at reasonable prices. Here are the top two reasonably priced tech stocks you should consider for 2021.

Tech stock 1

Nuvei (TSX:NVEI) stock is down just 8% from its all-time high. That’s despite the sell-off in the broader tech market. The reason, in my opinion, is that it’s a reopening play that’s still under-the-radar for most investors

Nuvei stock trades at a forward price-to-earnings (P/E) ratio of 56.71. Considering the fact that its growth rate was above 50% in recent quarters, the P/E-to-growth or PEG ratio is roughly 1. In other words, growth is appropriately priced at the moment. Indeed, Nuvei should see a surge in transactions as Canada’s economy opens up in the second-half of 2021. 

Keep an eye on this undervalued tech stock. 

Tech stock 2

Open Text (TSX:OTEX)(NASDAQ:OTEX) has recouped all the losses accrued the past year. While the stock has pulled lower significantly from its one year, the correction has come on the broader tech industry coming under pressure. A 7% correction might as well have made the stock cheaper and attractive for long-term bargain hunters.

Digital transformation

The company is well positioned for tremendous growth, given that its software and services are at the heart of the ongoing digital transformation. Open Text offers solutions that help businesses manage and connect data within the organization. Its solutions are finding great use in connecting large digital supply chains in manufacturing and the financial services sector.

Over the last five years, Open Text has more than doubled its sales, underscoring strong demand for its solutions. Its free cash flow has also increased by 135%, which explains the 75% increase in dividend payments, supporting the relatively stable 1.6% dividend yield.

Long-term prospects

The rate at which cloud service is growing affirms Open Text’s ability to generate solid recurring revenue, leading to higher earnings and free cash flow. The acquisition of the likes of Carbonite is expected to help the company gain a foothold in new markets. It has also inked strategic partnerships with the likes of Google enabling integration of Google Cloud, which should allow it to target more enterprise customers.

While the stock is trading with a price to earnings multiple of 18.21, it appears favorably valued given that the S&P 500 is trading with a P/E of 28. It also seems to be undervalued, going by the price to sales ratio of 4. A dividend yield of 1.66% all but makes the stock an ideal pick for income-focused investors.

Bottom line

Tech stocks have adjusted lower, which creates an opportunity for long-term investors seeking bargains. Most stocks are still overvalued, but pockets such as payment processors and overlooked enterprise software companies are looking remarkably attractive now.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. David Gardner owns shares of Alphabet (A shares). Tom Gardner owns shares of Alphabet (A shares). The Motley Fool owns shares of and recommends Alphabet (A shares). The Motley Fool recommends Open Text.

More on Tech Stocks

investment research
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

Is OpenText stock poised for a 2025 comeback? AI ambitions, a 3.8% yield, and cash flow power make it a…

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Emerging Canadian AI Companies With Big Potential

These tech stocks are paving the way to an AI-filled future, but still offer enough growth ahead for a strong…

Read more »

Young Boy with Jet Pack Dreams of Flying
Tech Stocks

Is Constellation Software Stock a Buy, Sell, or Hold for 2025?

CSU stock has long been a strong option for high growth, high value stocks. But are there now too many…

Read more »

An investor uses a tablet
Tech Stocks

Canadian Tech Stocks to Buy Now for Future Gains

Not all tech stocks are created equal. In fact, these three are valuable options every investor should consider.

Read more »

dividend growth for passive income
Tech Stocks

2 Rapidly Growing Canadian Tech Stocks With Lots More Potential

Celestica (TSX:CLS) and Constellation Software (TSX:CSU) are Canadian tech darlings worth watching in the new year.

Read more »

BCE stock
Tech Stocks

10% Yield: Is BCE Stock a Good Buy?

The yield is bigger than it's ever been in the company's history. That might not be a good thing.

Read more »

Happy shoppers look at a cellphone.
Tech Stocks

So You Own Shopify Stock: Is it Still a Good Investment?

Shopify (TSX:SHOP) stock has had a run, but there's still room to the upside.

Read more »

A person uses and AI chat bot
Tech Stocks

AI Where No One’s Looking: Seize Growth in These Canadian Stocks Before the Market Catches Up

Beyond flashy headlines about generative AI, these two Canadian AI stocks could deliver strong returns for investors who are willing…

Read more »