The Zacks Computer Peripheral Equipment industry comprises companies offering computer input, output and storage devices. These include keyboards, mouse, LCD panels, smart glass, analog to digital imaging solutions, touch sensors, 3D printers & additive manufacturing and transaction-based printer products, among others.
The industry is to some extent recession-resistant due to the nature of products of the companies operating in it. 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 to meet the current demand trend. This is strengthening their product portfolio.
Here are the three major themes in the industry:
- 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. Further, the 3D printing market presents a favorable long-term investment opportunity as a large number of engineers, designers, architects and entrepreneurs are resorting to 3Dsolutions for primary designing and product modeling. A recen t report by Gartner revealed that the global 3D printing industry is expected to reach $17.7 billion by 2020.
- Moreover, expanding total addressable market bodes well for the industry participants. Improving penetration into price sensitive regions like Asia Pacific and Middle East & Africa through low cost quality products enhances growth prospects. Additionally, recent talks of a truce between the United States and China related to the trade war boost the industry participants' near-term prospects.
- Sluggish PC demand, which persisted through the last few quarters, continues to hurt the companies in this industry. Per preliminary data released by Gartner, PC shipments in the first quarter of 2019 fell 4.6% year over year to 58.5 million units. Intel's CPU shortages coupled with soft consumer demand remained an overhang. However, Gartner is optimistic about long- term demand, which spells good news for the computer peripheral industry participants. Also, with the global IT spending projected to reach $3.8 trillion in 2019 by Gartner, prospects of the industry look promising. This is because higher spending on IT instruments is expected to lead to higher sales of computer peripheral equipment.
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 #76, which places it at the top 30% 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.
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 Sector, S&P 500
The Zacks Computer Peripheral Equipment industry has surpassed the Zacks S&P 500 composite as well as its own sector in the past year.
The stocks in this industry have collectively gained 8% compared with the Zacks Computer and Technology sector's rally of 6.3%, and the S&P 500's rise of 6.9%.
One Year Price Performance
Industry's Current Valuation
Comparing the industry with the Zacks S&P 500 composite on the basis of price-to-sales ratio (P/S), which is a commonly used multiple for valuing computer peripheral stocks, we see that the industry's ratio of 0.11 is lower than the S&P 500's 3.32 and the sector's 3.78.
Over the last five years, the industry has traded as high as 0.69X, as low as 0.08X and recorded a median of 0.52X, as the charts below show.
Price-to-Sales Ratio (TTM)
Price-to-Sales Ratio (TTM)
Cooling off of the U.S.-China trade war and growing demand for professional gaming equipment and 3D printing and additive manufacturing instruments should drive the industry.
Moreover, stable long-term prospect of the PC market is also a positive.
Here, we present a stock that has a Zacks Rank #2 (Buy).
This stock is well positioned to grow in the near term.
Switzerland-based Logitech International S.A. (LOGI) 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 stock has gained 10.1% in the past year.
The Zacks Consensus Estimate for current fiscal-year earnings has remained stable at $1.95 over the past 30 days.
We are also presenting two stocks with a Zacks Rank #3 (Hold) that investors may currently retain in their portfolio.
Andover, MA-based Mercury Systems Inc. (MRCY) is a commercial provider of secure sensor and mission processing subsystems for defense and intelligence programs.
This stock has gained 40.9% in the past year.
The Zacks Consensus Estimate for current fiscal-year earnings has remained stable at $1.78 over the past 30 days.
Based in Silicon Valley, CA, Electronics for Imaging, Inc. (EFII) develops technologies for manufacturing of signage, packaging, textiles, ceramic tiles and personalized documents, with a wide range of printers, inks, digital front ends, and a comprehensive business and production workflow suite.
This stock has gained 51.8% in the past year.
The Zacks Consensus Estimate for current fiscal-year earnings has remained stable at $1.56 over the past 30 days.
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