Gartner predicts that spending on IT services will grow 8% to $5.06 trillion this year, underscoring the role of technology in enhancing operations, flexibility and productivity. According to Statista, the IT services market is expected to reach $522 billion in revenue due to growing demand for durable products and increased adoption of technology to increase quality and efficiency.

IT services revenue is estimated to grow at a CAGR of 5.28 percent, reaching $675.20 billion by 2029. Additionally, excitement around AI, automation, quantum computing, hybrid cloud, and sustainability initiatives is transforming data processing and meeting the growing needs of consumers, further promoting Prospects of the sector

Considering these favorable trends, let’s examine the fundamental principles of two technologies – services pick, starting with the second pick.

Stock #2: NetScout Systems Inc. (NTCT)

NTCT provides global service assurance and cyber security solutions to protect digital business services from disruptions. The company offers nGeniusONE management software that predicts, anticipates, and resolves network and service delivery issues, as well as specialized platforms for analyzing and troubleshooting traffic in radio access and Wi-Fi networks. Offers forms and analytics modules.

On June 26, 2024, NTCT expanded its Arbor Cloud DDoS attack mitigation network across Canada, adding a new scrubbing center in Toronto with over 15 Tbps of attack capacity. The extension aims to reduce delays for Canadian businesses and ISPs while ensuring compliance with local privacy and data sovereignty regulations.

On June 20, 2024, NTCT announced a multi-year extension to its partnership with Vodafone, expanding Vodafone’s network monitoring capabilities in hybrid environments, including 5G standalone.

The agreement leverages NTCT’s InfinistreamNG to provide real-time visibility and smart data analytics, aimed at improving network performance and customer experience.

In terms of gross profit margin for the last 12 months, NTCT’s 77.41% is higher than the industry average of 49.20% at 57.3%. Its 16.18% trailing 12-month EBITDA margin is 64.9% higher than the 9.81% industry average. Likewise, the stock’s 7.14% trailing-12-month EBIT margin is 41.9% higher than the 5.03% industry average.

NTCT’s total revenue for the fourth quarter ended March 31, 2024 was $203.44 million. Its non-GAAP gross profit stood at $157.05 million. The company’s non-GAAP net income was $39.82 million, or $0.55 per share, representing increases of 46.5% and 44.7%, respectively, compared to the prior-year quarter.

Also, as of March 31, 2024, the company’s total current assets were $672.49 million, compared to $617.36 million as of March 31, 2023.

The Street expects NTCT’s EPS and revenue to grow 5.5% and 5.2% year-over-year to $0.77 million and $229.50 million, respectively, for the quarter ending December 31, 2024. NTCT beat consensus EPS estimates in three of the last four quarters. Over the past month, the stock has declined marginally and closed the last trading session at $18.77.

NTCT’s POWR ratings reflect strong prospects. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Rating evaluates stocks by 118 different factors, each with its own weighting.

It is ranked #7 of 79 stocks in the Technology – Services industry. It has an A grade for development and a B for value and quality. Click here to view NTCT’s speed, stability, and sentiment ratings.

Stock No. 2: Box, Inc. (the box)

BOX provides a cloud content management platform that enables organizations of all sizes to manage and share their content from anywhere on any device. It serves the financial services, healthcare, government, and legal services industries internationally.

On June 27, 2024, BOX announced major upgrades to BOX AI, including unlimited queries for Enterprise Plus users, integration with GPT-4o, and expanded support for different file types. These enhancements aim to improve content management and streamline workflows through advanced AI functionalities.

On April 9, 2024, BOX announced that Bulletproof, a global brand agency, selected BOX as its cloud platform for content and production management. Bulletproof will migrate from on-premise servers to BOX to enhance secure collaboration with clients and partners and improve workflow efficiency by accessing files and resources from any location.

In terms of trailing 12-month return on total capital, BOX’s 6.99% is 145.6% higher than the industry average of 2.85%. Likewise, its trailing 12-month return on total assets of 11.73% is 530.6% higher than the industry average of 1.86%. Its 0.92x trailing 12-month asset turnover ratio is 47.5% higher than the industry average of 0.62x.

BOX’s revenue for the first quarter ending April 30, 2024 increased 5.1% year-over-year to $264.66 million. Its non-GAAP gross profit rose 8.1% year over year to $212.18 million. The company’s non-GAAP operating income rose 22.7% year-over-year to $70.40 million.

Additionally, its non-GAAP attributable net income rose 22.9% year-over-year to $58.40 million. Its non-GAAP attributable net income per share rose 21.9% year over year to $0.39. In addition, the company’s non-GAAP free cash flow came in at $123.24 million, representing a year-over-year increase of 13.9%.

Analysts expect BOX’s EPS and revenue to grow 12.4% and 3% year-over-year to $0.40 and $269.20 million, respectively, for the quarter ending July 31, 2024. It beat EPS estimates in three of the last four quarters. Over the past six months, the stock gained 5.4% to close the last trading session at $25.96.

BOX’s positive outlook is reflected in its POWR ratings. It has an overall rating of A, which equates to a strong buy in our proprietary rating system.

It is ranked #4 in the Technology – Services industry. It has an A grade for development and quality and a B for value. To see BOX’s speed, stability, and sentiment ratings, click here.

What to do next?

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Shares of BOX were trading at $25.75 per share on Monday afternoon, down $0.38 (-1.45%). Year-to-date, BOX has gained 0.55%, compared to a 17.45% gain in the benchmark S&P 500 index over the same period.

About the Author: Abhishek Bhuyan

Abhishek started his professional journey as a financial journalist out of a keen interest in knowing the underlying factors that influence the future performance of financial instruments.

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Why These 2 Technology Services Stocks Are Perfect for Your Portfolio
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