Written by Aditya Raghunath at The Motley Fool Canada
While mega-cap tech giants are trading near record highs, several other companies are flying under the radar on Bay Street. In this article, I have identified two Canada-based tech stocks that are trading at a cheap valuation while growing at an enviable pace. Let’s see why you should consider investing in these two undervalued tech stocks today.
Valued at $390 million by market cap, Kraken Robotics (TSXV:PNG) is a marine technology company that designs, manufactures, and sells software-centric sensors and underwater robotic systems for unmanned underwater vehicles used in military and commercial applications.
It offers an underwater laser imaging system, an underwater vehicle for seabed mapping, an autonomous underwater vehicle, and an autonomous launch and recovery system that enables unmanned vehicles and their payloads to be brought aboard a host ship.
Kraken’s sales increased from $15.1 million in 2019 to $69.6 million in 2023. In the last 12 months, its revenue has more than doubled to $92 million. Kraken reported sales of $22.8 million in Q2 2024, up 67% year over year. Its product sales were higher at 83%, while Services sales grew by 11%.
Kraken Robotics is fairly profitable and reported an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $5.4 million in Q2. This indicates a margin of 24%, up from 22% in the year-ago period.
In Q2, Kraken announced multiple new orders totalling $20 million. Due to ongoing geopolitical tensions, the company is optimistic about strong industry demand signals. It stated, “The growth of unmanned systems in the subsea domain is accelerating as subsea drones are seen as a complement to very expensive, exquisite surface warfare assets and submarines, providing an attritable capabilities gap filler.”
Analysts expect its sales to rise to $95 million in 2024 and $116.4 million in 2025. Comparatively, earnings are forecast to more than double from $0.03 per share in 2023 to $0.07 per share in 2025. Priced at 24 times forward earnings, Kraken Robotics stock is not too expensive and trades at a 15% discount to consensus price target estimates.