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The Zacks Electronics – Measuring Instruments industry has been benefiting from the increasing deployment of 5G and rising user penetration of electric vehicles (EVs). In addition to this, the solid adoption of consumer-oriented smart IoT devices, including smart speakers, wearables and home security equipment, has been aiding industry participants like Keysight Technologies, Advantest and inTest. The strengthening demand for security and surveillance systems has been another 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, the industry players are increasing their spending on research and development, as well as sales and 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, machinery, mobile phones and LED displays worldwide bode well for the industry.
3 Trends Shaping the Future of Electronics - Measuring Instruments Industry
5G - Key Catalyst: The growing deployment of 5G holds near-term promise for the industry participants. An uptick in demand for 5G test solutions, which are required for 5G deployment, is a major positive. The growing number of high-speed data centers worldwide is another tailwind.
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 to bolster the 5G strength.
EV Proliferation - a Growth Driver: 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 the industry players, who are making efforts to capitalize on the EV-related growth opportunities.
Continuous innovation in the EV infrastructure, which has been bolstering the demand for simulation software, radars and other electronic measuring instruments, remains another positive. The growing proliferation of advanced driver-assistance systems has boosted the demand for electronics testing solutions. These factors are expected to continue to benefit the industry in the near term.
Solid Adoption of Fitness Trackers: 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 monitor personal health. The growing proliferation of these devices has fuelled the use of the flat-panel display (“FPD”) technology.
The rising demand for Augmented Reality /Virtual Reality devices, and OLED displays has been playing another significant role in driving the demand for FPDs. These factors are creating an extremely conducive growth environment for the industry players.
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 #34, which places it in the top 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 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 Oct 31, 2021, the industry’s earnings estimates for the current year have moved up 5.4%.
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, Outperforms Sector
The Zacks Electronics – Measuring Instruments industry has underperformed the Zacks S&P 500 composite, while outperforming the broader Zacks Computer and Technology sector in the past year.
The stocks in the industry have collectively gained 7.2% compared with the Zacks S&P 500 index’s rally of 12.2%. Notably, the Zacks Computer and Technology sector has lost 2.5% in the same time frame.
Industry's Current Valuation
On the basis of the 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 4.56X, higher than the S&P 500’s 4.4X and the sector’s 4.34X.
Over the past five years, the industry has traded as high as 4.56X and as low as 1.54X, with the median being 2.57X.
3 Measuring Instrument Stocks to Consider
Keysight Technologies: The 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 the solid demand for its semiconductor measurement solutions, as semiconductor companies are increasingly developing chips based on next-generation process technologies.
Additionally, this Zacks Rank #2 (Buy) 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 7.6% over a year. The Zacks Consensus Estimate for the company’s fiscal 2022 earnings has been revised upward by 0.3% over the past 60 days to $6.92 per share.
Advantest:The Japan-based company of semiconductor test equipment benefits from increasing spending by suppliers on production capacity enhancements and advanced technologies. The growing requirement of semiconductors in data centers, AI and automotive applications, servers, and PCs, owing to the coronavirus pandemic-induced ongoing digitalization, remains a major tailwind.
This Zacks Rank #2 company remains well-poised to capitalize on the solid demand for semiconductor test products on the back of its robust product portfolio. Further, the company remains optimistic about the rising device complexity associated with miniaturization, which is expected to lead to a further boost in the test demand.
Notably, Advantest has lost 8.3% in the past year. The Zacks Consensus Estimate for the company’s fiscal 2023 earnings moved north by 3.3% to $4.95 per share over the last 60 days.
inTEST:The Mount Laurell, NJ-based company is benefiting from an uptick in semiconductor demand. Further, the company is gaining from solid momentum across electric vehicle manufacturers.
This Zacks Rank #2 company, which offers thermal management products and ATE interface solutions, is well-poised to capitalize on the rising demand for thermonics cryogenic process chillers.
Notably, inTEST’s shares have gained 35.1% in the past year. The Zacks Consensus Estimate for 2022 earnings has moved northward by 1.7% to $1.17 per share over the past 60 days.
Just Released: Zacks Top 10 Stocks for 2022
In addition to the investment ideas discussed above, would you like to know about our 10 top buy-and-hold tickers for the entirety of 2022?
Last year's 2021Zacks Top 10 Stocks portfolio returned gains as high as +147.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights: Keysight Technologies, Advantest and inTest
For Immediate Release
Chicago, IL – February 15, 2022 – Today, Zacks Equity Research discusses Keysight Technologies (KEYS - Free Report) , Advantest (ATEYY - Free Report) and inTest (INTT - Free Report) .
Industry: Electronics - Measuring Instruments
Link: https://www.zacks.com/commentary/1867183/3-electronics-stocks-to-purchase-from-a-prospering-industry
The Zacks Electronics – Measuring Instruments industry has been benefiting from the increasing deployment of 5G and rising user penetration of electric vehicles (EVs). In addition to this, the solid adoption of consumer-oriented smart IoT devices, including smart speakers, wearables and home security equipment, has been aiding industry participants like Keysight Technologies, Advantest and inTest. The strengthening demand for security and surveillance systems has been another 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, the industry players are increasing their spending on research and development, as well as sales and 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, machinery, mobile phones and LED displays worldwide bode well for the industry.
3 Trends Shaping the Future of Electronics - Measuring Instruments Industry
5G - Key Catalyst: The growing deployment of 5G holds near-term promise for the industry participants. An uptick in demand for 5G test solutions, which are required for 5G deployment, is a major positive. The growing number of high-speed data centers worldwide is another tailwind.
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 to bolster the 5G strength.
EV Proliferation - a Growth Driver: 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 the industry players, who are making efforts to capitalize on the EV-related growth opportunities.
Continuous innovation in the EV infrastructure, which has been bolstering the demand for simulation software, radars and other electronic measuring instruments, remains another positive. The growing proliferation of advanced driver-assistance systems has boosted the demand for electronics testing solutions. These factors are expected to continue to benefit the industry in the near term.
Solid Adoption of Fitness Trackers: 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 monitor personal health. The growing proliferation of these devices has fuelled the use of the flat-panel display (“FPD”) technology.
The rising demand for Augmented Reality /Virtual Reality devices, and OLED displays has been playing another significant role in driving the demand for FPDs. These factors are creating an extremely conducive growth environment for the industry players.
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 #34, which places it in the top 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 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 Oct 31, 2021, the industry’s earnings estimates for the current year have moved up 5.4%.
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, Outperforms Sector
The Zacks Electronics – Measuring Instruments industry has underperformed the Zacks S&P 500 composite, while outperforming the broader Zacks Computer and Technology sector in the past year.
The stocks in the industry have collectively gained 7.2% compared with the Zacks S&P 500 index’s rally of 12.2%. Notably, the Zacks Computer and Technology sector has lost 2.5% in the same time frame.
Industry's Current Valuation
On the basis of the 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 4.56X, higher than the S&P 500’s 4.4X and the sector’s 4.34X.
Over the past five years, the industry has traded as high as 4.56X and as low as 1.54X, with the median being 2.57X.
3 Measuring Instrument Stocks to Consider
Keysight Technologies: The 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 the solid demand for its semiconductor measurement solutions, as semiconductor companies are increasingly developing chips based on next-generation process technologies.
Additionally, this Zacks Rank #2 (Buy) 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.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Notably, Keysight Technologies has gained 7.6% over a year. The Zacks Consensus Estimate for the company’s fiscal 2022 earnings has been revised upward by 0.3% over the past 60 days to $6.92 per share.
Advantest:The Japan-based company of semiconductor test equipment benefits from increasing spending by suppliers on production capacity enhancements and advanced technologies. The growing requirement of semiconductors in data centers, AI and automotive applications, servers, and PCs, owing to the coronavirus pandemic-induced ongoing digitalization, remains a major tailwind.
This Zacks Rank #2 company remains well-poised to capitalize on the solid demand for semiconductor test products on the back of its robust product portfolio. Further, the company remains optimistic about the rising device complexity associated with miniaturization, which is expected to lead to a further boost in the test demand.
Notably, Advantest has lost 8.3% in the past year. The Zacks Consensus Estimate for the company’s fiscal 2023 earnings moved north by 3.3% to $4.95 per share over the last 60 days.
inTEST:The Mount Laurell, NJ-based company is benefiting from an uptick in semiconductor demand. Further, the company is gaining from solid momentum across electric vehicle manufacturers.
This Zacks Rank #2 company, which offers thermal management products and ATE interface solutions, is well-poised to capitalize on the rising demand for thermonics cryogenic process chillers.
Notably, inTEST’s shares have gained 35.1% in the past year. The Zacks Consensus Estimate for 2022 earnings has moved northward by 1.7% to $1.17 per share over the past 60 days.
Just Released: Zacks Top 10 Stocks for 2022
In addition to the investment ideas discussed above, would you like to know about our 10 top buy-and-hold tickers for the entirety of 2022?
Last year's 2021Zacks Top 10 Stocks portfolio returned gains as high as +147.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys
Access Zacks Top 10 Stocks for 2022 today >>
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.