The Zacks Computer Peripheral Equipment industry comprises companies offering computer input and output devices. The products specifically include keyboards, mouse, LCD panels, smart glass, analog to digital imaging solutions, touch sensors, 3D printers and additive manufacturing and transaction-based printer products.
The ever-increasing demand for these products makes the revenue stream for this industry pretty stable. Particularly, products like printers, headphones, gaming accessories and others are less likely to run out of demand. Moreover, the highly competitive nature of the industry is encouraging the participants to come up with innovative and relevant products that meet the changing market needs.
Here are the three major themes in the industry:
- The companies in this industry are benefiting from stabilizing PC market and increasing enterprise spending on IT. Preliminary data released by Gartner displayed that PC shipment in the third quarter increased 0.1% year over year to 67.2 million units. Moreover, the research firm believes that even though the Intel CPU shortage might be a short-term dampener for the PC market, the overall PC demand in the long term will not be hampered. This spells good news for the industry participants. Also, with the global IT spending projected to reach $3.8 trillion in 2019 by Gartner, the prospects for the computer peripheral equipment industry look bright from a long-term perspective. This is because higher spending on IT instruments will lead to rise in sales of computer peripheral equipment.
- Industry participants are expected to benefit from the rising demand for gaming accessories and 3D printers. The gradual shift in consumer preference from mobile gaming to a more professional gaming experience is a major growth driver. Launch of advanced gaming devices and growing popularity of e-sports leagues are expected to boost this industry further. Additionally, the 3D printing market presents a favorable long-term investment opportunity as a large number of engineers, designers, architects and entrepreneurs are resorting to 3D solutions for their primary designing and product modeling. A recent report by P&S Market Research expects the worldwide 3D printing industry to reach $31.9 billion by 2023.
- The U.S.-China trade war had adversely impacted the companies operating in the industry. However, recent talks of a truce and the 90-day amnesty period bodes well for the industry participants in the near term.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Computer Peripheral Equipment industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #66, which places it at the top 26% 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 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. Since Jul 31, 2018, the industry’s earnings estimates for the current year have revised upward by 19 cents.
Before we present a few stocks that you may want to consider, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags Sector, S&P 500
The Zacks Computer Peripheral Equipment industry has lagged the Zacks S&P 500 composite as well as its own sector in the past year.
The stocks in this industry have collectively lost 20.2% against the Zacks Computer and Technology sector’s rally of 2.5% and the S&P 500’s rise of 4.6%.
One Year Price Performance
Industry’s Current Valuation
On the basis of forward 12-month price-to-earnings ratio, which is a commonly used multiple for valuing computer peripheral stocks, the industry trades at 101.79X versus the S&P 500’s 17.99X and the sector’s 18.61X.
Over the past five years, the industry has traded as high as 101.79X, as low as 11.8X and recorded a median of 14.41X, as the charts below show.
Price-to-Sales Ratio (TTM)
Price-to-Sales Ratio (TTM)
Stabilizing PC market, cooling off of the U.S.-China trade tensions and growing demand for professional gaming equipment, 3D printing and additive manufacturing instruments should continue driving the industry’s growth.
Here, we present three stocks that either have a Zacks Rank #1 (Strong Buy) or Rank 2 (Buy). These stocks are well positioned to grow in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.
Minneapolis-based Stratasys, Ltd. (SSYS - Free Report) is a manufacturer of 3D printers and materials. The company's systems are used by manufacturers to create models and prototypes to aid in new product design process. This Zacks Rank #1 stock has gained 3.1% in the past year. The Zacks Consensus Estimate for its current fiscal-year EPS has remained stable at 52 cents over the past 30 days.
Switzerland-based Logitech International S.A. (LOGI - Free Report) designs, manufactures and markets innovative peripherals like Internet video cameras, mice and trackballs, keyboards, audio and telephony products, interactive gaming devices and 3D controllers. This Zacks Rank #2 stock has gained 2.1% in the past year. The Zacks Consensus Estimate for its current fiscal-year EPS has remained stable at $1.87 cents over the past 30 days.
Hamden, CT-based TransAct Technologies Inc. (TACT - Free Report) designs, develops, manufactures and markets transaction-based printers and related products under the Ithaca, Magnetec and transact.com brand names. This Zacks Rank #2 stock has lost 18.5% in the past year. For this Zacks Rank #2 stock, the Zacks Consensus Estimate for current fiscal year earnings has increased 6 cents to 71 cents over the past 30 days.
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