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2 Commercial Printing Stocks to Watch Amid Industry Challenges
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The Zacks Commercial Printing industry seems to be benefiting from growing digitization, an increase in demand for commercial printers and higher promotional activities for products. Diversification in revenue sources has been a boon for the industry participants.
However, the pandemic’s impacts on customers’ spending, high innovation investments and rising preference for online media have marred the outlook of the industry participants. Also, pandemic-related supply-chain issues along with inflation in raw materials and difficulty in sourcing skilled labor remain concerns for the companies. Kornit Digital Ltd. (KRNT - Free Report) and Issuer Direct Corporation (ISDR - Free Report) are a couple of stocks with healthy prospects.
About the Industry
The Zacks Commercial Printing industry comprises companies that are primarily engaged in providing customized printed products and graphic designs. The commercial printing companies serve large corporates, decorators, online businesses and graphic professionals among others. Some of the products offered by the industry participants are digital printing systems, associated software, ink and other consumables, as well as value-added services. Some printing companies are engaged in providing technologies and services for document management to customers in the retail, technology, financial services, architectural, engineering, construction, food, entertainment and hospitality industries. These companies have been increasing investments for developing innovative technologies, boosting customer and employee experience as well as supply-chain modernization programs.
What's Shaping the Future of the Commercial Printing Industry?
Favorable Trends: The commercial printing industry has been benefiting from growing digitization and the use of technologically advanced equipment. Product manufactures are banking more on advertising their products to reach out to a higher number of customers for driving their sales and staying competitive. Also, the increase in demand for commercial printers in office products, labels, directories, catalogs and documents management services has been proving beneficial. Such diversification in revenue sources has been helping the industry participants to mitigate concentration risks.
Challenging Demand Environment & Strict Competition: The growing popularity of online media, particularly amid the pandemic, has been restraining demand for several products and services offered by the industry players. The companies also face severe competitive pressure from big and small players as well as from equipment manufacturers that offer similar services. Also, the companies are required to invest heavily in equipment and talent to stay competitive in the market and derive economies of scale. However, such investments often make them highly leveraged and compel small players to collaborate with larger ones or exit the business.
Persistent Woes: The imposition of COVID-19-restrictions owing to the outbreak of a third wave has made the near-term prospects of the industry players gloomy as it might adversely impact their customers’ spending. Also, the companies have been facing supply-chain disruptions and inflation in raw materials and other expenses, which have been weighing on their margins and profitability. The shortage of skilled workers in the United States is a persistent concern as well.
Zacks Industry Rank Indicates Bleak Prospects
The Commercial Printing industry is a 3-stock group within the broader Zacks Industrial Products sector. The industry currently carries a Zacks Industry Rank #218, which places it in the bottom 14% 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 weak 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 position in the bottom 50% of the Zacks-ranked industries is a result of bleak earnings prospects for the constituent companies in aggregate. Looking at the aggregate earnings estimate revision, it appears that analysts are keeping less faith in this group's earnings growth potential. The industry’s earnings estimates for the current year have moved down 44.8% over the past year.
Before we present a couple of promising stocks from the industry, it is worth taking a look at the industry’s performance and its valuation picture.
Industry Outperforms S&P 500 & Sector
The Zacks Commercial Printing industry has outperformed its own sector and the S&P 500 over the past year. The stocks in this space have collectively gained 48.9% compared with the Zacks Industrial Products sector’s growth of 7.2% and the S&P 500’s rally of 23.5%.
One-Year Price Performance
Commercial Printing Industry's Valuation
The Price/Earnings (P/E) ratio is commonly used for valuing commercial printing stocks.
The industry’s forward 12-month P/E ratio is 68.76. This clearly shows that the industry is trading above the S&P 500’s forward 12-month P/E ratio of 22.2 and the sector’s 21.08.
Over the past five years, the industry has traded at the highest level of 133.36x forward 12-month P/E and the lowest level of 6.73x. The median level, over the same period, was 40.11x.
Commercial Printing Industry’s Valuation Versus Sector
Commercial Printing Industry’s Valuation Versus S&P 500
Kornit Digital: The company is engaged in developing, manufacturing and marketing digital printing solutions for the printed textile industry throughout the world. The company is poised to benefit from a solid product portfolio, a strong demand environment for its products and solutions and focus on its operational efficiency in the quarters ahead. Kornit Digital presently carries a Zacks Rank #3.
Shares of this Rosh Haayin, an Ireland-based company have rallied 50.8% in the past year. While the company’s earnings beat estimates twice in the last four quarters, it met the same once and missed on one occasion, the earnings surprise being 4.85%, on average. KRNT’s earnings estimates have been stable at $1.18 for 2022 in the past 30 days.
Price and Consensus: KRNT
Issuer Direct: The company specializes in offering shareholder communications and compliance platforms, technologies, and services. Strengthening demand for products and solutions, healthy liquidity position and shareholder-friendly policies are anticipated to be beneficial. ISDR presently carries a Zacks Rank #3.
This Raleigh, NC-based company’s shares have appreciated 55.7% in the past year. While its earnings beat estimates twice in the last four quarters, it matched the same once and missed once, the earnings surprise being 28.67%, on average. In the past 30 days, the company’s earnings estimates have remained stable at $1.08 for 2022.
Price and Consensus: ISDR
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2 Commercial Printing Stocks to Watch Amid Industry Challenges
The Zacks Commercial Printing industry seems to be benefiting from growing digitization, an increase in demand for commercial printers and higher promotional activities for products. Diversification in revenue sources has been a boon for the industry participants.
However, the pandemic’s impacts on customers’ spending, high innovation investments and rising preference for online media have marred the outlook of the industry participants. Also, pandemic-related supply-chain issues along with inflation in raw materials and difficulty in sourcing skilled labor remain concerns for the companies. Kornit Digital Ltd. (KRNT - Free Report) and Issuer Direct Corporation (ISDR - Free Report) are a couple of stocks with healthy prospects.
About the Industry
The Zacks Commercial Printing industry comprises companies that are primarily engaged in providing customized printed products and graphic designs. The commercial printing companies serve large corporates, decorators, online businesses and graphic professionals among others. Some of the products offered by the industry participants are digital printing systems, associated software, ink and other consumables, as well as value-added services. Some printing companies are engaged in providing technologies and services for document management to customers in the retail, technology, financial services, architectural, engineering, construction, food, entertainment and hospitality industries. These companies have been increasing investments for developing innovative technologies, boosting customer and employee experience as well as supply-chain modernization programs.
What's Shaping the Future of the Commercial Printing Industry?
Favorable Trends: The commercial printing industry has been benefiting from growing digitization and the use of technologically advanced equipment. Product manufactures are banking more on advertising their products to reach out to a higher number of customers for driving their sales and staying competitive. Also, the increase in demand for commercial printers in office products, labels, directories, catalogs and documents management services has been proving beneficial. Such diversification in revenue sources has been helping the industry participants to mitigate concentration risks.
Challenging Demand Environment & Strict Competition: The growing popularity of online media, particularly amid the pandemic, has been restraining demand for several products and services offered by the industry players. The companies also face severe competitive pressure from big and small players as well as from equipment manufacturers that offer similar services. Also, the companies are required to invest heavily in equipment and talent to stay competitive in the market and derive economies of scale. However, such investments often make them highly leveraged and compel small players to collaborate with larger ones or exit the business.
Persistent Woes: The imposition of COVID-19-restrictions owing to the outbreak of a third wave has made the near-term prospects of the industry players gloomy as it might adversely impact their customers’ spending. Also, the companies have been facing supply-chain disruptions and inflation in raw materials and other expenses, which have been weighing on their margins and profitability. The shortage of skilled workers in the United States is a persistent concern as well.
Zacks Industry Rank Indicates Bleak Prospects
The Commercial Printing industry is a 3-stock group within the broader Zacks Industrial Products sector. The industry currently carries a Zacks Industry Rank #218, which places it in the bottom 14% 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 weak 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 position in the bottom 50% of the Zacks-ranked industries is a result of bleak earnings prospects for the constituent companies in aggregate. Looking at the aggregate earnings estimate revision, it appears that analysts are keeping less faith in this group's earnings growth potential. The industry’s earnings estimates for the current year have moved down 44.8% over the past year.
Before we present a couple of promising stocks from the industry, it is worth taking a look at the industry’s performance and its valuation picture.
Industry Outperforms S&P 500 & Sector
The Zacks Commercial Printing industry has outperformed its own sector and the S&P 500 over the past year. The stocks in this space have collectively gained 48.9% compared with the Zacks Industrial Products sector’s growth of 7.2% and the S&P 500’s rally of 23.5%.
One-Year Price Performance
Commercial Printing Industry's Valuation
The Price/Earnings (P/E) ratio is commonly used for valuing commercial printing stocks.
The industry’s forward 12-month P/E ratio is 68.76. This clearly shows that the industry is trading above the S&P 500’s forward 12-month P/E ratio of 22.2 and the sector’s 21.08.
Over the past five years, the industry has traded at the highest level of 133.36x forward 12-month P/E and the lowest level of 6.73x. The median level, over the same period, was 40.11x.
Commercial Printing Industry’s Valuation Versus Sector
Commercial Printing Industry’s Valuation Versus S&P 500
2 Commercial Printing Stocks in Focus
Below we have discussed two stocks from the industry, carrying a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Kornit Digital: The company is engaged in developing, manufacturing and marketing digital printing solutions for the printed textile industry throughout the world. The company is poised to benefit from a solid product portfolio, a strong demand environment for its products and solutions and focus on its operational efficiency in the quarters ahead. Kornit Digital presently carries a Zacks Rank #3.
Shares of this Rosh Haayin, an Ireland-based company have rallied 50.8% in the past year. While the company’s earnings beat estimates twice in the last four quarters, it met the same once and missed on one occasion, the earnings surprise being 4.85%, on average. KRNT’s earnings estimates have been stable at $1.18 for 2022 in the past 30 days.
Price and Consensus: KRNT
Issuer Direct: The company specializes in offering shareholder communications and compliance platforms, technologies, and services. Strengthening demand for products and solutions, healthy liquidity position and shareholder-friendly policies are anticipated to be beneficial. ISDR presently carries a Zacks Rank #3.
This Raleigh, NC-based company’s shares have appreciated 55.7% in the past year. While its earnings beat estimates twice in the last four quarters, it matched the same once and missed once, the earnings surprise being 28.67%, on average. In the past 30 days, the company’s earnings estimates have remained stable at $1.08 for 2022.
Price and Consensus: ISDR