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Diversified electronics manufacturer Amphenol Corporation (APH - Analyst Report) recently debriefed investors about its plans to bring about a two-for-one stock split in October this year. The split stock will be paid in the form of stock dividend and each shareholder at the close of business hours on Oct 2, 2014 will receive an additional share on the record date.

The strategic move is probably aimed at lowering the stock’s traded price to more attractive levels. Amphenol shares are currently trading near their 52-week high and have appreciated by over 29% in the last year. By maintaining steady market capitalization, the move is expected to entice more investors who might feel that the shares are trading significantly high compared with its peers.

On a trailing four-quarter basis, Amphenol shares are currently trading at a P/E multiple of 24.1 compared with the industry average of 18.9. The P/B multiple for the most recent quarter for Amphenol current stands at 5.2 compared with the industry tally of 3.3. These imply that the shares of the company are trading at relatively higher prices than other comparable companies in the industry.

The lowered share price is expected to increase the liquidity of the stock and lead to more trading as the number of outstanding shares is doubled and share price halved. This in turn might further drive up share prices as more small investors buy the stock and boost demand.

The tactical decision follows stellar second-quarter 2014 results, wherein Amphenol reported record earnings and revenues on the back of solid organic and inorganic growth. The impressive growth was primarily attributable to Amphenol’s technology leadership and market and geographic diversification. This was achieved on the back of a lean and flexible cost structure and an agile and entrepreneurial management team.   

Moving forward, Amphenol is bullish about its revenue and earnings expectations in the forthcoming quarters despite the uncertainties prevailing in the global economy. The ongoing revolution in electronics further enables the company to capitalize on these opportunities and strengthen its position in the market. We also remain buoyant on the stock.

Amphenol currently has a Zacks Rank #2 (Buy). Other stocks that look promising and are worth a look in the industry include InvenSense, Inc. (INVN - Snapshot Report), Nidec Corp. (NJ - Snapshot Report) and Universal Display Corp. (OLED - Snapshot Report). All these stocks carry a comparable Zacks Rank #2 (Buy).

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