3 beaten down ASX All Ords tech shares that are printing cash

Despite the crash in the technology sector, one expert says it's clear not all tech shares are equal.

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Key points

  • Tech shares have been heavily sold off this year
  • But one expert says it's made clear which companies are the "earners and burners" of the tech sector
  • Tech shares that did well in FY22 had a solid book of customers and a strong future outlook, with their depressed valuations presenting buying opportunities

All Ordinaries (ASX: XAO) shares have certainly had a rough 12 months, with the index down 11% over the past year.

No doubt the technology sector has played some role — tech is the worst performing sector in that time. The S&P/ASX 200 All Technology Index (ASX: XTX) is down 35.3% while the S&P/ASX 200 Info Technology Index (ASX: XIJ) is even lower, down 38.6% over the past 12 months.

Clearly, the rotation out of tech stocks has hit the sector hard although it's also delineated clear "earners and burners", according to one fund manager.

Pie Funds portfolio manager Chris Bainbridge told the Australian Financial Review:

We believe this correction is one of the best things that could have happened for a number of tech companies because it enforces a financial discipline that hasn't been there for the last few years. There are now depressed valuations for companies with demonstrably better earnings than anyone was projecting six months ago, and that's something the market is missing. The caveat is you have to find the right stocks. Buying the index won't work.

So, here's a list of some of those earners flying above their peers that may present good buying opportunities.

Codan Ltd (ASX: CDA)

Codan reported $162 million in earnings before interest, taxes, depreciation, amortisation (EBITDA) and a record net profit after tax (NPAT) of $100.5 million for FY22.

Revenues also saw a 16% increase year over year (yoy) to $506.1 million.

Codan produces"rugged" communications equipment such as transceivers and mining technology. It notes that it will likely record further growth in FY23. This will be supported by a strong order book of $149 million and further opportunities in the pipeline.

Codan's shares are down 34% year to date.

Hansen Technologies Ltd (ASX: HSN)

Hansen is another profitable tech company although its earnings for FY22 were in a slump. NPAT finished at $41.9 million, down 27%, with EBITDA of $99.9 million, down 16% yoy.

Revenues were also down to $296.5 million, 4% lower yoy.

Hansen is a software development company that creates billing systems, mostly for companies in the energy and telecommunications sector. It noted in its outlook that it's looking to expand into additional markets.

Hansen shares are down 13.97% year to date.

Dicker Data Ltd (ASX: DDR)

Finally, Dicker Data reported growth in its top and bottom lines for HYFY22. Total revenue surged 36.5% yoy to $1,459.4 million. NPAT grew 7% yoy to $34.3 million, while EBITDA grew 19.5% to $61.2 million.

Dicker Data is a distributor of both software and hardware. It provided outlook for the rest of its reporting period, stating it sees additional opportunities in the cybersecurity industry with its Hills Security and SIT division.

Dicker Data's shares are down 30% year to date.

Motley Fool contributor Matthew Farley has no positions in the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Dicker Data Limited. The Motley Fool Australia has positions in and has recommended Dicker Data Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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