3 Tech Stocks With Attractive Valuations
After years of rapid expansion, the technology industry has been at the forefront of market growth. Therefore, investors might consider buying fundamentally strong tech stocks, such as Open Text Corporation (OTEX), Clear Secure, Inc. (YOU), and RingCentral, Inc. (RNG), which are trading with attractive valuations.
One might wonder what attractive valuations are. To answer this fundamentally, an undervalued stock is generally considered a stock with an attractive valuation. Traditional metrics like the price-to-earnings (P/E) ratio, price-to-sales (P/S) ratio, and discounted cash flow (DCF) analysis help investors assess whether a stock is undervalued.
Tech companies are positioned to benefit from growing demand in AI, cloud computing, and autonomous vehicles. Also, over the years, the tech industry has undergone a transition to as-a-service and consumption models, but now’s the time to take the next step in this pricing journey as value-based or outcome-based pricing, which is well aligned with the platform shift to agentic AI.
As per Statista, in 2025, the IT services market is set to be worth $1.51 trillion. Moreover, revenue in the IT services sector is expected to grow at a CAGR of 5.8% by 2029.
Given these favorable industry trends, let us dive deep into the fundamentals of the top tech stocks:
Open Text Corporation (OTEX)
Headquartered in Waterloo, Canada, with a market cap of $8.12 billion, OTEX provides information management products and services. It provides software solutions and content services, including content collaboration and intelligent capture to records management, collaboration, e-signatures, and archiving.
On December 5, OTEX announced a strategic partnership with Secure Code Warrior to integrate its dynamic learning platform into the OpenText Fortify application security product suite. This partnership allows development teams to move quickly without compromising security, reduce risks, reduce remediation time, resolve vulnerabilities, and build trust with customers.
In terms of forward non-GAAP P/E, OTEX is trading at 7.97x, 68.7% lower than the industry average of 25.48x. Likewise, the stock’s forward EV/EBITDA and Price/Sales multiples of 7.45 and 1.44 are 53.7% and 55.4% lower than their respective industry averages of 16.09 and 3.22.
For the first quarter of fiscal 2025, which ended on September 30, OTEX’s total revenues stood at $1.27 billion, while its cloud services and subscriptions segment reported a total revenue of $457.02 million, up marginally year-over-year.
In addition, the company’s attributable net income stood at $84.42 million, indicating a 4.3% growth from the prior-year quarter period, while its earnings per share came in at $0.32, up 6.7% year-over-year.
Analysts expect OTEX’s revenue and EPS for the current year (ending June 2025) to be $5.31 billion and $3.66, respectively. For the fiscal year 2026, its revenue and EPS are expected to grow by 2.5% and 12.9% from the prior year to $5.45 billion and $4.13, respectively.
OTEX shares have surged 2.4% over the past three months to close the last trading session at $29.14.
OTEX’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
OTEX has an A grade for Value and a B for Growth. It is ranked #14 out of 127 stocks in the Software – Application industry. Click here to see the additional ratings for OTEX (Momentum, Stability, Sentiment, and Quality).
Clear Secure, Inc. (YOU)
YOU operates a secure identity platform under the CLEAR brand. Its secure identity platform is a multi-layered infrastructure consisting of its front-end, including enrollment, verification, and linking, and robust, secure, and scalable backend.
On December 9, YOU opened a new location at the Mall of America, the largest shopping and entertainment complex, the largest shopping and entertainment complex, to enroll and renew customers in the Trusted Traveler program. This new opening is its first non-airport location in Bloomington for enrollment and renewal services, enhancing the company’s expansion to provide customers with a fast and efficient travel experience.
In the same month, YOU announced that to enroll and renew consumers in the Trusted Traveler program, it opened a new location at the Shops at the Oculus inside the Westfield World Trade Center, making it the first non-airport location in Manhattan.
In terms of forward non-GAAP P/E, YOU is trading at 19.43x, 23.8% lower than the industry average of 25.48x. Likewise, the stock’s forward EV/Sales and EV/EBIT multiples of 2.43 and 15.60 are 26% and 28.6% lower than the industry averages of 3.28x and 21.85x, respectively.
In the fiscal third quarter, which ended on September 30, 2024, YOU’s revenue increased 23.7% year-over-year to $198.42 million, while its operating income rose 82% from the year-ago value to $35.09 million. The company’s adjusted net income amounted to $42.46 million and $0.30 per share, up 34.9% and 42.9% from the prior-year quarter, respectively. Also, its adjusted EBITDA grew 64.3% from the prior-year quarter to $48.65 million.
Street expects YOU’s revenue for the fiscal fourth quarter (ending December 2024) to increase by 18.2% year-over-year to $202.15 million. Moreover, its EPS estimate of $0.29 for the same period indicates a 72.9% year-over-year growth. In addition, it surpassed the consensus revenue estimates in each of the trailing four quarters, which is impressive.
Over the past nine months, the stock has gained 38.4%, closing the last trading session at $23.52.
YOU’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has an A grade for Value and a B for Growth and Quality. Within the A-rated Software – Security industry, it is ranked #4 out of 20 stocks. Click here to see YOU’s ratings for Momentum, Stability, and Sentiment.
RingCentral, Inc. (RNG)
RNG provides cloud communications, video meetings, collaboration, and contact center software-as-a-service solutions worldwide. The company’s products include RingCentral Message Video Phone, RingCentral Contact Center, RingCX, RingCentral Video, and RingCentral Professional Services, serving different industries.
On January 30, RNG introduced Studio, a new modern capability of the RingCentral Events ™ platform, which enables organizers to stream and produce engaging, branded events all within the same user interface, and AI Clips, enabling marketers to produce AI-generated highlights from their events. This also elevates and simplifies the production business.
On December 5, 2024, RNG inaugurated its new state-of-the-art office in Bangalore, India. The expansion strengthens the company’s regional presence and positions it to capitalize on India’s growing role as a global tech innovation center, potentially boosting operational efficiency and scalability.
In terms of forward EV/Sales, RNG is trading at 1.94x, which is 40.9% lower than the industry average of 3.28x. The stock’s forward Price/Cash Flow ratio of 6.94x is 68.3% below the industry average of 21.93x. Also, its forward EV/EBITDA multiple of 7.85 compares to the industry average of 16.09x.
RNG’s total revenues for the third quarter (ended September 30, 2024) increased 9.1% year-over-year to $608.77 million. Its gross profit improved 10.1% from the year-ago value to $428.58 million, while its non-GAAP income from operations for the quarter stood at $127.89 million, up 19.7% year-over-year.
The company’s non-GAAP net income came in at $88.93 million and $0.95 per share, indicating 16.9% and 21.8% year-over-year growths, respectively. Also, RNG’s non-GAAP free cash flow increased 50.7% year-over-year, amounting to $105.44 million.
The consensus revenue estimate of $612.37 million for the fiscal fourth quarter (ended December 2024) represents a 7.2% increase year-over-year. The consensus EPS estimate of $0.97 for the current quarter indicates a 12.5% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue and EPS in each of the trailing four quarters.
Shares of RNG have gained 12.1% over the past nine months to close the last trading session at $34.18.
RNG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
RNG has an A grade for Growth and Value and a B for Quality. It is ranked #5 out of 42 stocks in the B-rated Software – Business industry. Click here to access the RNG’s additional ratings for Momentum, Stability, and Sentiment.
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OTEX shares were trading at $29.38 per share on Tuesday afternoon, up $0.24 (+0.82%). Year-to-date, OTEX has gained 3.74%, versus a 2.66% rise in the benchmark S&P 500 index during the same period.