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Bright Outlook for Electronics Measuring Instruments Industry

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The Zacks Electronics – Measuring Instruments industry comprises companies offering wearables, test solutions and equipment, metrology solutions, and thermo management products to name a few.

Electronics aids to efficiency and automation of almost any work, rendering it virtually ubiquitous in this day and age. Consequently, the industry is benefiting from the growing usage of electronic devices in every major sector namely consumer, automobile, industrial, aerospace and defense, and communications.

Here are the three major themes in the industry:

  • Robust demand in the consumer sector for connected appliances is the key catalyst. The rapid proliferation of consumer-focused Internet of Things (IoT) devices like smart speakers and home security solutions are driving demand for the products offered by some of the industry participants. Ongoing technical advancement in the telecommunication sector is also acting as a tailwind. Moreover, increasing need for security and surveillance system, and satellites in the aerospace and defense industry are driving the demand for testing solutions.
  • Growing adoption of fitness and wellness trackers and smart watches, which help in personal health monitoring, has spurred the usage for flat-panel display (FPD) technology. Further, rising demand for Augmented Reality (AR)/Virtual Reality (VR) devices and OLED displays are playing a significant role in driving the demand for FPDs.
  • The emergence of IoT services and 5G technology holds long-term promise as electronic devices form the very fulcrum of their existence. Moreover, the industry is expected to remain on a positive track backed by strong efforts made toward the ongoing modification of the Internet infrastructure and robust demand for IoT supported factory automation in the industrial sectors. Further, the evolution of smart cars and self-driving vehicles is likely to continue aiding growth in this industry because of the growing need for tracking meters and navigation devices in these vehicles.

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 #25, which places it at the top 10% of 256 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 positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. In the past year, the industry’s earnings estimates for the current year have increased 6.8%.

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 Outperforms S&P 500 &Sector

The Zacks Electronics – Measuring Instruments industry has outperformed both the Zacks S&P 500 composite as well as its own sector in the past year.

The stocks in this industry have collectively rallied 22.7% compared with the S&P 500’s gain of 3.9% and the Zacks Computer and Technology sector’s increase of 0.3%.

One Year Price Performance

 

Industry’s Current Valuation

On the basis of price-to-sales ratio (P/S), which is a commonly used multiple for valuing Electronics – Measuring Instruments stocks, the industry is currently trading at 2.59X, lower than the S&P 500’s 3.2X and the sector’s 3.36X.

Over the past five years, the industry has traded as high as 4.44X and as low as 1.34X, recording a median of 2.10, as the charts below show.

Price-to-Sales Ratio (TTM)

 

Bottom Line

The near-term as well as long-term growth prospects of this industry are expected to be bright given increased spending by manufacturers of semiconductors, automobiles, machineries, mobile phones and LED displays.

Here we present a couple of top-ranked stocks:

Mount Laurell, NJ-based InTest Corp. (INTT - Free Report) offers thermal management products and ATE interface solutions, which cater to the needs of the semiconductor industry in the development and testing of integrated circuits. The company has a Zacks Rank #1 (Strong Buy) and average four-quarter positive earnings surprise of 53.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Price and Consensus: INTT

 

KeySight Technologies Inc. (KEYS - Free Report) based in Santa Rosa, CA, is a provider of electronic design and test instrumentation systems. The company serves the communication and electronic industries. It has a Zacks Rank #2 (Buy) and average four-quarter positive earnings surprise of 13.25%.

Price and Consensus: KEYS

 

Also, investors may hold on to the following stocks with Zacks Rank #3 (Hold):

Fitbit, Inc. (FIT - Free Report) based in San Francisco, specializes in wearable activity tracking devices that record personal data, including the number of steps taken, distance traveled, calories burned and other wellness related metrics. It delivered average positive surprise of 174.4% in the trailing four quarters.

Price and Consensus: FIT



 

Camtek Ltd. (CAMT - Free Report) is a manufacturer of metrology and inspection equipment. The company also offers software solutions to the semiconductor industry that are utilized in advanced packaging, memory, CMOS Image Sensors, MEMS, RF and other segments. It has recorded average positive earnings surprise of 5.85% in the trailing four quarters.

Price and Consensus: CAMT

 

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In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Keysight Technologies Inc. (KEYS) - free report >>

inTest Corporation (INTT) - free report >>

Fitbit, Inc. (FIT) - free report >>

Camtek Ltd. (CAMT) - free report >>

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