2 Niche Tech Stocks That Are Outperforming the Industry

Tech stocks like Pason Systems (TSX:PSI) could outperform the rest of the tech sector.

| More on:

Tech stocks are in a severe bear market. Since last year, some of the most prominent technology companies have lost roughly half their market value; some, even more. However, not all tech stocks are underperforming. Some have done better than the rest of the market and could sustain this momentum in the months ahead. 

Here are the top two niche tech stocks that are outperforming the rest of the sector in 2022. 

Pason Systems

Unlike the tech sector, energy stocks are booming. There’s a global shortage of oil and gas because of a decade of underinvestment in the sector. This year, the conflict in Eastern Europe has caused blocked even more supply, pushing oil prices higher. 

High oil prices lead to more drilling — a process where Pason Systems (TSX:PSI) plays a key role. The company’s software platform helps energy giants locate, manage and operate drilling sites across 12 countries. In other words, it’s the data analysis hub for oil and gas producers. 

In its latest quarter, the company reported a 75% surge in revenue and a whopping 360% boost in net income. As the hunt for more oil production continues, the stock could see further upside. Meanwhile, the company has also diversified into the renewable sector with clients in the solar energy space. This segment is relatively small but is growing much faster than the rest of the business. 

Pason Systems stock is up 80% over the past year, while the TSX 60 is up just 4% over the same period. Most other software companies have lost value over this period. If you’re bullish on energy, this could be an underrated bet on the sector. 

CGI 

Consulting giant CGI (TSX:GIB.A)(NYSE:GIB) is yet another underrated, outperforming tech stock. The IT consulting and management business has been far more robust than software or e-commerce. CGI reported a 10% bump in revenue in its most recent quarter. Margins are expanding, too. Earnings per share were up 14% year over year in this period. 

Based on these robust fundamentals, the stock has outperformed the rest of the tech sector. CGI stock has lost just 4% of its value year to date compared to 34% for the S&P/TSX Capped IT ETF over the same period. 

The outlook remains bright. The company reported an order backlog of $23 billion. That’s roughly 1.3 times its annual sales. Management said that “over 80% of clients” intend to invest more money in digitizing their business process. That means CGI could see more upside and reliable cash flow for the foreseeable future. 

Bottom line

The tech sector is in a deep correction. In fact, the flagship Canadian IT index has lost more than a third of its value this year. However, niche consulting services and oil drilling software have outperformed. Keep an eye on CGI and Pason Systems as we navigate this correction.

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.

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pason Systems. The Motley Fool recommends CGI GROUP INC CL A SV.

More on Tech Stocks

cloud computing
Tech Stocks

3 No-Brainer Tech Stocks to Buy With $1,000 Right Now

These three Canadian tech stocks could be among the best growth opportunities in the market right now.

Read more »

happy woman throws cash
Tech Stocks

3 Growth Stocks That Could Be Long-Term Wealth Creators

These three growth stocks aim to grow their financials at a higher rate than the industry average, thus delivering superior…

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

Is POET Technologies a Top AI Stock for Canadian Investors?

Canada has relatively few AI stocks, and the ones it has are different from American AI stocks in terms of…

Read more »

Rocket lift off through the clouds
Tech Stocks

2 Growth Stocks That Could Skyrocket in 2025 and Beyond

Wondering what types of stocks could rapidly rise in 2025? Check out these two stocks with substantial upside if they…

Read more »

up arrow on wooden blocks
Tech Stocks

The 3 Smartest Tech Stocks to Buy With $500 Right Now

Tech stocks can be seen as a bit risky, but these three have far less risk and more stability for…

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Tech Stocks

Shopify: A Must-Have Growth Stock for Your TFSA Now (and the Next 10 Years)

Shopify (TSX:SHOP) stock isn't just a top growth company, it's a titan worth owning in your decades-long TFSA fund.

Read more »

cloud computing
Tech Stocks

Best Stock to Buy Right Now: Manulife vs CIBC

Want the best stocks? These two are certainly the best options. But which is the better buy?

Read more »

profit rises over time
Tech Stocks

4 Reasons to Buy Constellation Software Stock Like There’s No Tomorrow

Constellation Software stock continued its climb upwards after recent earnings, and this only adds to its appeal.

Read more »