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Anatomy of Success: IPG Photonics Corporation (IPGP)

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When a company has earned the coveted Zacks Rank #1 (Strong Buy) they have a high probability of outperforming the market over the next 1 to 3 months.  And if you are just getting started, this is a great way to help you identify the best companies in which to invest.  

The ranking system finds companies both big and small that have the right characteristics to produce superior gains.  Achieving a Rank of #1 is not easy, as only 5% of companies within the Zacks Rank universe earn this position.  The example below illustrates how a company was added to the Zacks Rank #1 list, and remained on the list post a strong earnings report as it continued to see price appreciation beyond the three month period.

Example IPG Photonics Corporation (IPGP - Free Report)

IPG Photonics Corporation (IPGP - Free Report) , is the world leader in high-power fiber lasers and amplifiers. IPG pioneered the development and commercialization of optical fiber-based lasers for use in diverse applications, primarily materials processing. Fiber lasers have revolutionized the industry by delivering superior performance, reliability and usability at a lower total cost of ownership compared with conventional lasers, allowing end users to increase productivity and decrease operating costs.

On May 5th, 2017, IPG Photonics was added to the Zacks Rank #1 (Strong Buy) list, a few days after the company reported Q1 17 earnings results.  IPG easily beat both the Zacks consensus earnings and revenue estimates where revenues rose by +38%, and EPS grew by 50% on a year over year basis.  Further, management increased guidance for both revenues and EPS (above the midpoints) due to the strength of its material processing markets, and power fiber laser sales.  By the close of the bell on May 5th, the stock price closed at $133.74

The company held onto its Zacks Rank #1 going into Q2 earnings on August 2nd, where they once again beat both top and bottom line expectations with revenues jumping up another +46%, and EPS up 53% YoY.  In the quarter the company saw broad based strength in almost all regions, with demand for its core products at an all-time high.  This second consecutive quarter of impressive results caused analysts to increase estimates for Q3 and for the fiscal year.  Three months after becoming a Zacks Rank #1, to stock price closed at $162.60 (August 7th), a +21.6% gain.  

IPG Photonics remained a Rank #1 going into its Q3 earnings report on October 31st.  The company beat the Zacks estimates for the third consecutive quarter as revenues were up another +48%, and EPS rose by +64% YoY.  Both EPS and revenues (+64%, and +48%) continued to see massive growth as the fiber laser and power cutting divisions outperformed their elevated expectations.  Once again management increased revenue and EPS guidance for the next quarter and fiscal year.  Six months after becoming a Zacks Rank #1, the stock price closed at $219.25 (on November 6th), a +63.9% gain.  

Going into its Q4 earnings report, IPG Photonics currently has a Zacks Rank #3 (Hold) rating, and as of the close of the bell on February 9th, the stock price closed at $232.414, a total gain of +73.8%.  

The table below shows the price performance of IPGP (in green), and the 12 month forward looking EPS estimate (in red) from when it became a Zacks Rank #1 till the close of the bell February 9th.

Overall, by utilizing the Zacks Ranking system, you can easily identify the elite stocks which are best positioned to beat the market on a consistent basis, and how to stay in those top stocks as they continue to grow.

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