Electronics – Measuring Instruments industry has been benefiting from 5G-related growth opportunities and prospects around electric vehicles (EV). In addition to this, the increasing need for security and surveillance system, and the rapid proliferation of consumer-oriented smart IoT devices such as smart speakers, wearables and home security equipment have been aiding industry participants like Keysight Technologies ( KEYS Quick Quote KEYS - Free Report) , Nova Measuring Instruments ( NVMI Quick Quote NVMI - Free Report) and inTEST Corporation ( INTT Quick Quote INTT - Free Report) . Industry Description
The Zacks Electronics – Measuring Instruments industry comprises companies that offer wearables, test solutions and equipment, metrology solutions, and thermo management products.
The major end-markets being served by the particular industry are consumer, automobile, industrial, aerospace &defense, semiconductor, healthcare and communications, to name a few. 3 Trends Shaping the Future of Electronics – Measuring Instruments Industry The growing deployment of 5G holds near-term promise for industry participants. An uptick in the demand for 5G test solutions, which are required for 5G deployment, is a major positive. Moreover, the current coronavirus-triggered work-from-home wave globally, which has been bolstering the demand for high-speed Internet services, bodes well for electronic companies that are enhancing their 5G efforts. Additionally, the growing number of high-speed data centers worldwide is a tailwind. Given the upbeat scenario, the industry is anticipated to remain on the growth trajectory, backed by strong efforts made toward bolstering 5G strength. 5G - a Growth Driver: The growing momentum across EVs, including hybrid and self-driving vehicles, amid the coronavirus-induced softness in the automotive sector remains a key catalyst. Increasing investment in advanced automotive technology and the strengthening demand for EV test solutions are driving the prospects of industry participants that are making efforts to capitalize on the EV-related growth opportunities. Moreover, continuous innovation in EV infrastructure, which is bolstering the demand for simulation software, radars and other electronic measuring instruments, remains another positive. In addition to this, the growing proliferation of advanced driver-assistance systems has given a strong boost to the demand for electronics testing solutions. These factors are likely to continue benefiting the industry in the near term. EV Prospects Aiding Industry: The coronavirus-induced crisis has led to an increased focus on personal fitness, health and wellness. This, in turn, has emphasized the importance of fitness and wellness trackers and smartwatches, which help in personal health monitoring. The growing proliferation of these devices has fuelled the use of flat-panel display (“FPD”) technology. Further, the rising demand for Augmented Reality (“AR”)/Virtual Reality (“VR”) devices and OLED displays has been playing a significant role in driving demand for FPDs. These factors are creating an extremely conducive environment for growth of the industry players. Solid Demand for Fitness Trackers: Zacks Industry Rank Indicates Bright Prospects
The Zacks Electronics - Measuring Instruments industry is housed within the broader Zacks
Computer and Technology sector. It carries a Zacks Industry Rank #37, which places it in the top 15% 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 solid 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. The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since Sep 30, 2020, the industry’s earnings estimates for the current year have moved up 4.1%. 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 Beats S&P 500, Lags Sector
The Zacks Electronics – Measuring Instruments industry has outperformed the Zacks S&P 500 composite but underperformed the broader Zacks Computer and Technology sector in the past year.
The stocks in this industry have collectively gained 36.8% compared with the Zacks S&P 500’s and the Zacks Computer and Technology sector’s rally of 17.9% and 37.3%, respectively. One-Year Price Performance Industry’s Current Valuation
On the basis of forward 12-month price-to-sales ratio (P/S), which is a commonly used multiple for valuing Electronics – Measuring Instruments stocks, the industry is currently trading at 4.6X, greater than the S&P 500’s 4.59X but lower than the sector’s 4.99X.
Over the past five years, the industry has traded as high as 4.6X and as low as 0.99X, with the median being at 1.86X as the charts below show. Forward 12-Month Price-to-Sales (P/S) Ratio 3 Measuring Instrument Stocks to Keep a Close Eye on Keysight Technologies: This Santa Rosa, CA-based company is well-poised to capitalize on accelerating 5G deployment, courtesy of rising demand for 5G test solutions. Further, as semiconductor companies look to develop chips based on next-generation process technologies, the demand for its semiconductor measurement solutions has been on the rise. Additionally, this Zacks Rank #2 (Buy) company, which is a provider of electronic design and test instrumentation systems, is likely to gain from high government spending and momentum in investments aimed at technology advancements. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Notably, Keysight Technologies has gained 40.8% over a year. The Zacks Consensus Estimate for fiscal 2021 earnings has been revised upward by 0.4% over the past 60 days to $5.54 per share. Price and Consensus: KEYS Nova Measuring Instruments: The Israel-based company is riding on solid momentum across large foundry/logic customers and memory providers. Further, the company is gaining strong traction on the back of its proactive service packages thatare designed to improve the install base productivity and metrology capabilities. Further, this Zacks Rank #2 company, which offers advanced metrology solutions, includingmonitoring and measurement systems for the semiconductor manufacturing industry, is benefiting from its Nova ASTERA platform. Notably, Nova Measuring Instruments has gained 95.7% over a year. The Zacks Consensus Estimate for 2021 earnings has been revised upward by 2.1% over the past 60 days to $2.47 per share. Price and Consensus: NVMI inTEST Corporation: The Mount Laurell, NJ-based company is benefiting from an uptick in semiconductor demand. Further, the company is gaining from solid momentum across electric vehicle manufacturers. This Zacks Rank #3 (Hold) company, which offers thermal management products and ATE interface solutions, is well-poised to capitalize on the rising demand for thermonics cryogenic process chillers. Notably, inTEST’s shares have gained 24.2% in the past year. The Zacks Consensus Estimate for 2021 earnings has remained stable at 34 cents per share over the past 60 days. Price and Consensus: INTT