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4 Top Stocks to Watch From the Prospering Electronics Industry
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The Zacks Electronics - Miscellaneous Components industry is benefiting from solid adoption of AI and the ongoing democratization of IoT techniques that is transforming robotics, industrial automation, transportation systems, retail, as well as healthcare. Continuous development of new products and solutions in the above-mentioned space should drive growth.
Also, demand for electronics continues to rise, driven by different factors including growing use of electronic devices in daily life, increasing complexity of electronic products, and the ongoing development of new solutions for energy generation and conservation, which should continue to benefit the industry participants. Littelfuse (LFUS - Free Report) , TE Connectivity (TEL - Free Report) , SMTC Corporation and Vishay Precision (VPG - Free Report) are well positioned to benefit from these positives.
Industry Description
The Zacks Electronics - Miscellaneous Components industry primarily comprises companies that provide a wide range of accessories and parts that are used in electronic products. Their offerings include power control and sensor technologies to mitigate equipment damage, testing products for safety, along with advanced medical solutions.
The industry participants cater to varied end markets such as telecommunications, automotive electronics, medical devices, industrial, transportation, energy harvesting, defense and aerospace electronic systems, as well as consumer electronics. Its customers mainly consist of original equipment manufacturers, independent electronic component distributors and electronic manufacturing service providers.
What’s Shaping the Future of Electronics - Miscellaneous Components Industry?
Rapid Adoption of IoT Devices Drives Growth: Electronics aid efficiency and automation of almost any work, rendering it virtually ubiquitous in this day and age. Growing demand for IoT devices like smart speakers, smart watches and home security solutions, dual-screen laptops, as well as high graphics performance gaming PCs is a tailwind. The current scenario seems to have favored this industry that has been gaining from increased demand for electronic goods and appliances fueled by coronavirus-induced safety rules, as well as precautions.
Automation Boom a Tailwind: The requirement of faster, more powerful and energy-efficient electronics is leading to increased automation. The use of control systems such as computers and robots, as well as information technologies for handling different processes and machineries is driving growth of this industry. Growing installation of collaborative robots, which add efficiency to the production process by working with the production workers, will continue to benefit the industry participants. Also, IoT-supported factory automation solutions are a contributing factor. In addition, the evolution of smart cars & autonomous vehicles is expected to drive growth of this industry.
Miniaturization Remains a Key Factor: Industry participants are benefiting from the ongoing transition in semiconductor manufacturing technology. Demand for advanced packaging that enables miniaturization of electronic products remains strong. Consistent shift to smaller dimensions, rapid adoption of new device architectures like FinFET transistors and 3D-NAND, along with increasing utilization of new manufacturing materials to increase transistor and bit density are driving demand for the solutions provided by the industry players.
Zacks Industry Indicates Impressive Prospects
The Zacks Electronics - Miscellaneous Components industry is housed within the broader Computer and Technology sector. It carries a Zacks Industry Rank #98, which places it in the top 40% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates strong near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags Sector and S&P 500
The Zacks Electronics - Miscellaneous Components industry has underperformed the broader Zacks Computer and Technology sector, and S&P 500 composite over the past year.
The industry has gained 10.2% over this period versus the S&P 500 and broader sector’s rally of 15.1% and 33.1%, respectively.
One-Year Price Performance
Industry’s Current Valuation
On the basis of forward 12-month price to earnings, which is a commonly used multiple for valuing electronics - miscellaneous components stocks, the industry is currently trading at 21.31X versus the S&P 500’s 22.35X and sector’s 26.33X.
Over the past five years, the industry has traded as high as 21.31X, as low as 13.89X and recorded a median of 17.21X, which is depicted in the charts shown below.
Price-to-Earnings (P/E) Ratio (F1)
Price-to-Earnings (P/E) Ratio (F1)
4 Electronics Components Stocks to Buy
Littelfuse: The company is benefiting from strong demand for products, solid execution and disciplined cost-management actions. Further, solid demand in the automotive, and strength in several electronics and industrial markets are driving growth. Higher-than-expected demand for electronics from the ongoing work, study and stay-at-home trends is a key catalyst.
Further, this Zacks Rank #1 (Strong Buy) company is well positioned to benefit from robust design activity, given several strategic wins in high-growth industrial, electronics and transportation applications. Notably, Littelfuse has improved 24.9% in the past year.
The Zacks Consensus Estimate for 2020 earnings has been revised 30.2% upward to $5.60 per share over the past 30 days.
Price and Consensus: LFUS
TE Connectivity: The company is well poised to gain from strong momentum across data centers. Solid demand for data and devices in cloud applications as well as data centers, courtesy of increasing work-from-home trend due to the ongoing coronavirus pandemic, is likely to further drive growth. Further, prospects in the medical business owing to strong position of the company in interventional procedures and partnerships with leading device makers are expected to benefit it going forward.
Shares of TE Connectivity have gained 16% in the past year. This Zacks Rank #2 (Buy) company is likely to gain from increasing growth opportunities in the Transportation segment. Growing proliferation of autonomous features has been acting as a tailwind. You can see the complete list of today’s Zacks #1 Rank stocks here.
Notably, the Zacks Consensus Estimate for fiscal 2021 earnings has been upwardly revised by 6% over the past 30 days to $5.16 per share.
Price and Consensus: TEL
SMTC Corporation: Another Zacks rank #2 company is expected to gain from strengthening footprint in new end markets. We note that a solid momentum in the Industrial, Power and Clean Technology business is expected to boost Test and Measurement revenues. Further, growing momentum across the Aerospace and Defense market is anticipated to aid the company in winning customers.
Shares of SMTC Corporation have gained 53.3% in the past year. The rising adoption among medical customers and growing clout of SMTC’s products required in 5G implementation are expected to be tailwinds.
Notably, the Zacks Consensus Estimate for 2020 earnings has been upwardly revised by 5.6% over the past 30 days to 19 cents per share.
Price and Consensus: SMTX
Vishay Precision: It is a leading developer of resistive foil technology products such as sensors for a wide variety of applications. The company is benefiting from the ongoing strength in advanced sensors products. Also, strength in its consumer application and precision agriculture remains a positive.
Further, this Zacks Rank #2 company is benefiting from increased orders in the avionic, military, and space and test and measurement markets.
Notably, Vishay Precision has lost 18% over a year. The Zacks Consensus Estimate for 2020 earnings has been revised 30.7% upward to $1.32 per share over the past 30 days.
Price and Consensus: VPG
Looking for Stocks with Skyrocketing Upside?
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Image: Bigstock
4 Top Stocks to Watch From the Prospering Electronics Industry
The Zacks Electronics - Miscellaneous Components industry is benefiting from solid adoption of AI and the ongoing democratization of IoT techniques that is transforming robotics, industrial automation, transportation systems, retail, as well as healthcare. Continuous development of new products and solutions in the above-mentioned space should drive growth.
Also, demand for electronics continues to rise, driven by different factors including growing use of electronic devices in daily life, increasing complexity of electronic products, and the ongoing development of new solutions for energy generation and conservation, which should continue to benefit the industry participants. Littelfuse (LFUS - Free Report) , TE Connectivity (TEL - Free Report) , SMTC Corporation and Vishay Precision (VPG - Free Report) are well positioned to benefit from these positives.
Industry Description
The Zacks Electronics - Miscellaneous Components industry primarily comprises companies that provide a wide range of accessories and parts that are used in electronic products. Their offerings include power control and sensor technologies to mitigate equipment damage, testing products for safety, along with advanced medical solutions.
The industry participants cater to varied end markets such as telecommunications, automotive electronics, medical devices, industrial, transportation, energy harvesting, defense and aerospace electronic systems, as well as consumer electronics. Its customers mainly consist of original equipment manufacturers, independent electronic component distributors and electronic manufacturing service providers.
What’s Shaping the Future of Electronics - Miscellaneous Components Industry?
Rapid Adoption of IoT Devices Drives Growth: Electronics aid efficiency and automation of almost any work, rendering it virtually ubiquitous in this day and age. Growing demand for IoT devices like smart speakers, smart watches and home security solutions, dual-screen laptops, as well as high graphics performance gaming PCs is a tailwind. The current scenario seems to have favored this industry that has been gaining from increased demand for electronic goods and appliances fueled by coronavirus-induced safety rules, as well as precautions.
Automation Boom a Tailwind: The requirement of faster, more powerful and energy-efficient electronics is leading to increased automation. The use of control systems such as computers and robots, as well as information technologies for handling different processes and machineries is driving growth of this industry. Growing installation of collaborative robots, which add efficiency to the production process by working with the production workers, will continue to benefit the industry participants. Also, IoT-supported factory automation solutions are a contributing factor. In addition, the evolution of smart cars & autonomous vehicles is expected to drive growth of this industry.
Miniaturization Remains a Key Factor: Industry participants are benefiting from the ongoing transition in semiconductor manufacturing technology. Demand for advanced packaging that enables miniaturization of electronic products remains strong. Consistent shift to smaller dimensions, rapid adoption of new device architectures like FinFET transistors and 3D-NAND, along with increasing utilization of new manufacturing materials to increase transistor and bit density are driving demand for the solutions provided by the industry players.
Zacks Industry Indicates Impressive Prospects
The Zacks Electronics - Miscellaneous Components industry is housed within the broader Computer and Technology sector. It carries a Zacks Industry Rank #98, which places it in the top 40% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates strong near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags Sector and S&P 500
The Zacks Electronics - Miscellaneous Components industry has underperformed the broader Zacks Computer and Technology sector, and S&P 500 composite over the past year.
The industry has gained 10.2% over this period versus the S&P 500 and broader sector’s rally of 15.1% and 33.1%, respectively.
One-Year Price Performance
Industry’s Current Valuation
On the basis of forward 12-month price to earnings, which is a commonly used multiple for valuing electronics - miscellaneous components stocks, the industry is currently trading at 21.31X versus the S&P 500’s 22.35X and sector’s 26.33X.
Over the past five years, the industry has traded as high as 21.31X, as low as 13.89X and recorded a median of 17.21X, which is depicted in the charts shown below.
Price-to-Earnings (P/E) Ratio (F1)
Price-to-Earnings (P/E) Ratio (F1)
4 Electronics Components Stocks to Buy
Littelfuse: The company is benefiting from strong demand for products, solid execution and disciplined cost-management actions. Further, solid demand in the automotive, and strength in several electronics and industrial markets are driving growth. Higher-than-expected demand for electronics from the ongoing work, study and stay-at-home trends is a key catalyst.
Further, this Zacks Rank #1 (Strong Buy) company is well positioned to benefit from robust design activity, given several strategic wins in high-growth industrial, electronics and transportation applications. Notably, Littelfuse has improved 24.9% in the past year.
The Zacks Consensus Estimate for 2020 earnings has been revised 30.2% upward to $5.60 per share over the past 30 days.
Price and Consensus: LFUS
TE Connectivity: The company is well poised to gain from strong momentum across data centers. Solid demand for data and devices in cloud applications as well as data centers, courtesy of increasing work-from-home trend due to the ongoing coronavirus pandemic, is likely to further drive growth. Further, prospects in the medical business owing to strong position of the company in interventional procedures and partnerships with leading device makers are expected to benefit it going forward.
Shares of TE Connectivity have gained 16% in the past year. This Zacks Rank #2 (Buy) company is likely to gain from increasing growth opportunities in the Transportation segment. Growing proliferation of autonomous features has been acting as a tailwind. You can see the complete list of today’s Zacks #1 Rank stocks here.
Notably, the Zacks Consensus Estimate for fiscal 2021 earnings has been upwardly revised by 6% over the past 30 days to $5.16 per share.
Price and Consensus: TEL
SMTC Corporation: Another Zacks rank #2 company is expected to gain from strengthening footprint in new end markets. We note that a solid momentum in the Industrial, Power and Clean Technology business is expected to boost Test and Measurement revenues. Further, growing momentum across the Aerospace and Defense market is anticipated to aid the company in winning customers.
Shares of SMTC Corporation have gained 53.3% in the past year. The rising adoption among medical customers and growing clout of SMTC’s products required in 5G implementation are expected to be tailwinds.
Notably, the Zacks Consensus Estimate for 2020 earnings has been upwardly revised by 5.6% over the past 30 days to 19 cents per share.
Price and Consensus: SMTX
Vishay Precision: It is a leading developer of resistive foil technology products such as sensors for a wide variety of applications. The company is benefiting from the ongoing strength in advanced sensors products. Also, strength in its consumer application and precision agriculture remains a positive.
Further, this Zacks Rank #2 company is benefiting from increased orders in the avionic, military, and space and test and measurement markets.
Notably, Vishay Precision has lost 18% over a year. The Zacks Consensus Estimate for 2020 earnings has been revised 30.7% upward to $1.32 per share over the past 30 days.
Price and Consensus: VPG
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by referendums and legislation, this industry is expected to blast from an already robust $17.7 billion in 2019 to a staggering $73.6 billion by 2027. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot stocks we're targeting >>