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3 Laser Stocks to Watch for Gains in a Prospering Industry
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The Zacks Laser Systems and Components industry benefits from the growing consumer need for faster and higher precision volume manufacturing techniques with lower power consumption despite the coronavirus fallouts. Moreover, the near-term slowdown in China, Europe and North America is concerning.
However, upbeat demand from electronics, semiconductors and healthcare end-markets is a major growth driver. IPG Photonics (IPGP - Free Report) , Cutera (CUTR - Free Report) and CyberOptics are well-positioned to benefit from these trends. Robust demand for high power continuous wave and pulsed laser for cutting and battery processing applications, growing demand for high-performance optical devices and ongoing adoption of cloud computing, autonomous driving, IoT and 5G are key catalysts for these industry participants.
Industry Description
The Zacks Laser Systems and Components industry comprises companies offering high-performance fiber lasers, fiber amplifiers and diode lasers, optical and photonic products, and scanning technology solutions. The key end-markets are semiconductor, metrology, advanced communication and medical devices. Industry participants also provide high precision 3D sensors and system products for inspection and metrology. Moreover, in the medical devices space, laser and other energy-based aesthetic treatments can achieve therapeutic results by affecting structures within the skin. The development of safe and effective aesthetic treatments has resulted in a well-established market for these procedures. The company also operates in the cyclical surface mount technology (SMT) and semiconductor capital equipment markets.
3 Laser Systems & Components Industry Trends to Watch Out For
Emerging Applications Driving Demand for Lasers: The industry is benefiting from increasing demand for emerging applications like additive manufacturing, facial recognition, gesture recognition, LiDAR applications and IoT. Advanced lasers, especially those with 3D sensing (3DS) capabilities, are enhancing interactions using technology. Notably, 3DS, the technology that allows users to create 3D printable objects, control games with body gestures and measure objects, is much in demand.
Laser-IoT Combination Supports Efficiency: As industries are increasingly adopting automation techniques, combining lasers with IoT improves operating efficiency. Notably, IoT-supported manufacturing equipment is far easier to update with firmware. The combination not only reduces costs but also increases flexibility and reliability manifold by enabling material handling capabilities through remote sources. Additionally, strong demand from semiconductor and allied markets, which are seeing a rapid shift toward production of micro and nano devices, is a positive for industry participants.
Improving China Market Key Catalyst: Moderate improvement in the China market post coronavirus-induced disruptions bodes well for industry players like IPG Photonics, which has a significant exposure to the country’s industrial laser market. However, weak demand in Europe and North America due to the COVID-19 outbreak is expected to hurt top-line growth, at least in the near term. Moreover the U.S. ban on Huawei is a bother. Inventory build-up at this Chinese tech giant worries its component suppliers, some of whom are customers of the Laser Systems and Components industry players.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Laser Systems and Components industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #80, which places it in the top 32% 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 dim 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 the top industry picks, it is worth looking at the industry’s shareholder returns and current valuation first.
Industry Underperforms Broader Industry and S&P 500
The Zacks Laser Systems and Components industry has underperformed the broader Zacks Computer and Technology sector and the S&P 500 composite over the past year.
The industry has declined 0.9% over this period against the S&P 500’s increase of 28.9% and the broader sector’s rally of 32.4%.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month P/S, which is a commonly used multiple for valuing Laser Systems and Components stocks, we see that the industry is currently trading at 8.31X compared with the S&P 500’s 4.92X. It is also trading above the sector’s trailing 12-month P/S of 5.47X.
Over the last five years, the industry has traded as high as 12.44X, as low as 3.15X and at the median of 5.57X, as the chart below shows.
Trailing 12-Month Price-to-Sales (P/S) Ratio
3 Laser Stocks to Keep a Close Eye on
IPG Photonics: The company is riding on strong demand for its core material processing product. Its fiber lasers are replacing traditional tools and handheld welders, which is driving top-line growth. IPG Photonics remains focused on driving sales of advanced applications, electric vehicle battery production, medical and micro processing, thereby enhancing its prospects. Increasing sales of green pulsed lasers used to improve solar efficiency has become a meaningful contributor to the top line. An improving China market will benefit IPG Photonics’ second-half results, driven by solid demand in foil cutting and welding applications related to electric vehicle batteries.
The Zacks Consensus Estimate for IPG Photonics’ 2021 earnings has been unchanged at $5.10 per share over the past month. The Zacks Rank #2 (Buy) stock has declined 12.5% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: IPGP
CyberOptics: Shares of this Minneapolis, MN-based company have returned 45.2% year to date. This Zacks Rank #3 (Hold) company is a leading provider of sensors and inspection systems that provide process yield and throughput improvement solutions for the global electronic assembly and semiconductor capital equipment markets.
Solid adoption of CyberOptics’ high precision 3D Multi-Reflection Suppression (MRS) based optical sensors for inspection and metrology in key vertical markets like Surface Mount Technology (SMT) and semiconductor are major growth drivers. Its solutions boosts customer yields, throughput and operating efficiency, thereby saving time and expenses. The company has solid growth potential in market for Micro LED inspection, advanced packaging and metrology.
The Zacks Consensus Estimate for CyberOptics’ current-year earnings has stayed at $1.25 per share over the past 30 days. The stock has lost 3.6% in the past year.
Price & Consensus: CYBE
Cutera: Based in Brisbane, CA, this Zacks Rank #3 company offers medical device products. The stock has rallied 132.4% in the past year.
Cutera benefits from substantial Skincare revenues. Consumables sales growth remains strong, driven by the continued recovery of energy-based treatment volumes.
The consensus mark for fiscal 2021 earnings has remained 58 cents per share over the past 30 days.
Price & Consensus: CUTR
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3 Laser Stocks to Watch for Gains in a Prospering Industry
The Zacks Laser Systems and Components industry benefits from the growing consumer need for faster and higher precision volume manufacturing techniques with lower power consumption despite the coronavirus fallouts. Moreover, the near-term slowdown in China, Europe and North America is concerning.
However, upbeat demand from electronics, semiconductors and healthcare end-markets is a major growth driver. IPG Photonics (IPGP - Free Report) , Cutera (CUTR - Free Report) and CyberOptics are well-positioned to benefit from these trends. Robust demand for high power continuous wave and pulsed laser for cutting and battery processing applications, growing demand for high-performance optical devices and ongoing adoption of cloud computing, autonomous driving, IoT and 5G are key catalysts for these industry participants.
Industry Description
The Zacks Laser Systems and Components industry comprises companies offering high-performance fiber lasers, fiber amplifiers and diode lasers, optical and photonic products, and scanning technology solutions. The key end-markets are semiconductor, metrology, advanced communication and medical devices. Industry participants also provide high precision 3D sensors and system products for inspection and metrology. Moreover, in the medical devices space, laser and other energy-based aesthetic treatments can achieve therapeutic results by affecting structures within the skin. The development of safe and effective aesthetic treatments has resulted in a well-established market for these procedures. The company also operates in the cyclical surface mount technology (SMT) and semiconductor capital equipment markets.
3 Laser Systems & Components Industry Trends to Watch Out For
Emerging Applications Driving Demand for Lasers: The industry is benefiting from increasing demand for emerging applications like additive manufacturing, facial recognition, gesture recognition, LiDAR applications and IoT. Advanced lasers, especially those with 3D sensing (3DS) capabilities, are enhancing interactions using technology. Notably, 3DS, the technology that allows users to create 3D printable objects, control games with body gestures and measure objects, is much in demand.
Laser-IoT Combination Supports Efficiency: As industries are increasingly adopting automation techniques, combining lasers with IoT improves operating efficiency. Notably, IoT-supported manufacturing equipment is far easier to update with firmware. The combination not only reduces costs but also increases flexibility and reliability manifold by enabling material handling capabilities through remote sources. Additionally, strong demand from semiconductor and allied markets, which are seeing a rapid shift toward production of micro and nano devices, is a positive for industry participants.
Improving China Market Key Catalyst: Moderate improvement in the China market post coronavirus-induced disruptions bodes well for industry players like IPG Photonics, which has a significant exposure to the country’s industrial laser market. However, weak demand in Europe and North America due to the COVID-19 outbreak is expected to hurt top-line growth, at least in the near term. Moreover the U.S. ban on Huawei is a bother. Inventory build-up at this Chinese tech giant worries its component suppliers, some of whom are customers of the Laser Systems and Components industry players.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Laser Systems and Components industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #80, which places it in the top 32% 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 dim 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 the top industry picks, it is worth looking at the industry’s shareholder returns and current valuation first.
Industry Underperforms Broader Industry and S&P 500
The Zacks Laser Systems and Components industry has underperformed the broader Zacks Computer and Technology sector and the S&P 500 composite over the past year.
The industry has declined 0.9% over this period against the S&P 500’s increase of 28.9% and the broader sector’s rally of 32.4%.
One-Year Price Performance
Industry's Current Valuation
On the basis of the trailing 12-month P/S, which is a commonly used multiple for valuing Laser Systems and Components stocks, we see that the industry is currently trading at 8.31X compared with the S&P 500’s 4.92X. It is also trading above the sector’s trailing 12-month P/S of 5.47X.
Over the last five years, the industry has traded as high as 12.44X, as low as 3.15X and at the median of 5.57X, as the chart below shows.
Trailing 12-Month Price-to-Sales (P/S) Ratio
3 Laser Stocks to Keep a Close Eye on
IPG Photonics: The company is riding on strong demand for its core material processing product. Its fiber lasers are replacing traditional tools and handheld welders, which is driving top-line growth. IPG Photonics remains focused on driving sales of advanced applications, electric vehicle battery production, medical and micro processing, thereby enhancing its prospects. Increasing sales of green pulsed lasers used to improve solar efficiency has become a meaningful contributor to the top line. An improving China market will benefit IPG Photonics’ second-half results, driven by solid demand in foil cutting and welding applications related to electric vehicle batteries.
The Zacks Consensus Estimate for IPG Photonics’ 2021 earnings has been unchanged at $5.10 per share over the past month. The Zacks Rank #2 (Buy) stock has declined 12.5% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: IPGP
CyberOptics: Shares of this Minneapolis, MN-based company have returned 45.2% year to date. This Zacks Rank #3 (Hold) company is a leading provider of sensors and inspection systems that provide process yield and throughput improvement solutions for the global electronic assembly and semiconductor capital equipment markets.
Solid adoption of CyberOptics’ high precision 3D Multi-Reflection Suppression (MRS) based optical sensors for inspection and metrology in key vertical markets like Surface Mount Technology (SMT) and semiconductor are major growth drivers. Its solutions boosts customer yields, throughput and operating efficiency, thereby saving time and expenses. The company has solid growth potential in market for Micro LED inspection, advanced packaging and metrology.
The Zacks Consensus Estimate for CyberOptics’ current-year earnings has stayed at $1.25 per share over the past 30 days. The stock has lost 3.6% in the past year.
Price & Consensus: CYBE
Cutera: Based in Brisbane, CA, this Zacks Rank #3 company offers medical device products. The stock has rallied 132.4% in the past year.
Cutera benefits from substantial Skincare revenues. Consumables sales growth remains strong, driven by the continued recovery of energy-based treatment volumes.
The consensus mark for fiscal 2021 earnings has remained 58 cents per share over the past 30 days.
Price & Consensus: CUTR
