Electronics – Measuring Instruments industry has been benefiting from the increasing deployment of 5G and rising user penetration of electric vehicles (EV). In addition to this, the solid adoption of consumer-oriented smart IoT devices such as smart speakers, wearables and home security equipment has been aiding industry participants like Keysight Technologies ( KEYS Quick Quote KEYS - Free Report) , Nova Measuring Instruments ( NVMI Quick Quote NVMI - Free Report) and Camtek ( CAMT Quick Quote CAMT - Free Report) . Further, strengthening demand for security and surveillance system has been a boon for the industry players. Industry Description
The Zacks Electronics – Measuring Instruments industry comprises companies, which offer wearables, test solutions and equipment, electronic design, test instrumentation systems, metrology solutions, and thermo management products. Notably, these industry players are increasing their spend on research and development as well as sales & marketing in order to stay afloat in an era of technological advancements and changing industry standards. The major end-markets served by the underlined industry are consumer, automotive, industrial, aerospace & defense, semiconductor, healthcare and communications, to name a few. Further, rising spending by manufacturers of semiconductors, automobiles, machineries, mobile phones and LED displays worldwide bode well for this particular industry.
3 Trends Shaping the Future of Electronics - Measuring Instruments Industry
The growing deployment of 5G holds near-term promise for the industry participants. An uptick in the demand for 5G test solutions, which are required for 5G deployment, is a major positive. Additionally, the growing number of high-speed data centers worldwide is a tailwind.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.Given the upbeat scenario, the industry is anticipated to remain on the growth trajectory, backed by strong efforts made to bolster 5G strength. 5G –Key Catalyst:
The increased focus on personal fitness, health and wellness amid the pandemic has emphasized the importance of fitness and wellness trackers and smartwatches, which help in monitoring personal health. The growing proliferation of the 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 the demand for FPDs. The factors are creating an extremely conducive growth environment for the industry players. Solid Adoption of Fitness Trackers: Growing momentum across EVs, including hybrid and self-driving vehicles, remains a key catalyst. Increasing investment in advanced automotive technology and the strengthening demand for EV test solutions have been driving the prospects of industry participants, who are making efforts to capitalize on the EV-related growth opportunities. Moreover, continuous innovation in EV infrastructure, which has been 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 boosted the demand for electronics testing solutions. The factors are expected to continue to benefit the industry in the near term. EV Proliferation – a Growth Driver: 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 #18, which places it in the top 7% 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 Jan 31, 2021, the industry’s earnings estimates for the current year have moved up by 7%. 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 S&P 500 & Sector
The Zacks Electronics – Measuring Instruments industry has underperformed the Zacks S&P 500 composite and the broader Zacks Computer and Technology sector in the past year.
The stocks in the industry have collectively gained 34% compared with the Zacks S&P 500 and the Zacks Computer and Technology sector’s rally of 38.4% and 47.6%, respectively. One-Year Price Performance Image Source: Zacks Investment Research
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 2.91X, lower than the S&P 500’s 4.7X and the sector’s 4.81X.
Over the past five years, the industry has traded as high as 3.77X and as low as 0.99X, with the median being 2.07X as the charts below show. Forward 12-Month Price-to-Sales (P/S) Ratio
Image Source: Zacks Investment Research 3 Measuring Instrument Stocks to Keep a Close Eye on
Camtek: The Israel-based manufacturer of metrology and inspection equipment benefits from the growing share in the 2D inspection market. The company is benefiting from its robust system performance across 2D applications. Additionally, increasing demand for 5G-related applications remains a tailwind. Further, this Zacks Rank #1 (Strong Buy) company is well-positioned to capitalize on the rising demand for semiconductor devices on the back of its software solutions utilized in advanced packaging, memory, sensors and MEMS. Notably, Camtek has returned 175.9% in the past year. The Zacks Consensus Estimate for the company’s 2021 earnings moved north by 66.7% to $1.40 per share over the last 60 days. Price and Consensus: CAMT Image Source: Zacks Investment Research 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, which are designed to improve the install base productivity and metrology capabilities.
Further, this Zacks Rank #2 (Buy) company, which offers advanced metrology solutions, including monitoring and measurement systems for the semiconductor manufacturing industry, is benefiting from its Nova ASTERA platform.
Notably, Nova Measuring Instruments has gained 108.8% over a year. The Zacks Consensus Estimate for the company’s 2021 earnings has been revised upward by 18.2% over the past 60 days to $2.92 per share. Price and Consensus: NVMI Image Source: Zacks Investment Research Keysight Technologies: This Santa Rosa, CA-based company is well-poised to capitalize on the accelerating 5G deployment, courtesy of the rising demand for 5G test solutions. Further, the company is benefiting from higher investments in 400G/ 800G ethernet for data centers. Additionally, Keysight Technologies is riding on solid demand for its semiconductor measurement solutions, as semiconductor companies are increasingly developing chips based on next-generation process technologies. Additionally, this Zacks Rank #3 (Hold) 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. Notably, Keysight Technologies has gained 33.9% over a year. The Zacks Consensus Estimate for the company’s fiscal 2021 earnings has been revised upward by 2.1% over the past 60 days to $5.88 per share. Price and Consensus: KEYS
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