A simultaneous uptick in IT spending and income levels, along with the introduction of new technologies in electronic devices, has significantly bolstered the electronic tech industry.
Amid this backdrop, investors could consider buying fundamentally strong electronic tech stocks Universal Electronics Inc. (UEIC), Dolby Laboratories, Inc. (DLB), and Brother Industries, Ltd. (BRTHY). Before exploring the fundamentals of these stocks, let’s first understand what’s shaping the electronic tech industry’s prospects.
Early replacements and shortened device lifespans are expected to drive the rise in device spending. Gartner predicts worldwide device spending will total $687.94 million this year, increasing by 3.6% year-over-year.
A sustained rise in the usage of home and personal devices like smart TVs, speakers, gaming consoles, and smartphones for the purpose of entertainment, communication, and education has been observed. The growing popularity of new trends like the miniaturization of electronic components for easy mobility and easy-to-use high-performing devices is gaining recognition in the market.
Moreover, the inclusion of AI and IoT-enabled smart devices in modern households is rising due to the rapid upgrade of consumers' standard of living and growing income levels. As consumer spending on technology products and services increases, the demand for advanced electronics will grow, contributing to the expansion of the electronic technology market.
The advent of digitalization in new electronic components has supported the development of new technologies like 5G, the Internet of Things, edge computing, artificial intelligence, machine learning, and more. aiding the industry in meeting consumers' ever-changing demands and finding innovative solutions.
The global consumer electronics market is expected to grow at a 7.6% CAGR, reaching $1.47 trillion by 2032.
With these favorable trends in mind, let's delve into the fundamentals of the three Technology - Electronics stock picks, starting with the third in line.
Stock #3: Universal Electronics Inc. (UEIC)
UEIC designs, develops, manufactures, ships, and supports control and sensor technology solutions internationally. It offers voice-enabled, automatically programmed universal two-way radio frequency and infrared remote controls to video service providers, original equipment manufacturers (OEMs), retailers, and private label customers.
UEIC’s trailing-12-month asset turnover ratio of 1.09x is 9.6% higher than the industry average of 1x. Similarly, its trailing-12-month levered FCF margin of 9.09% is 66.1% higher than the industry average of 5.47%.
UEIC’s net sales for the fiscal fourth quarter that ended March 31, 2024, stood at $91.90 million. Its adjusted gross profit amounted to $27.23 million. Moreover, its cash and cash equivalents at end of period came in at $26.91 million. As of March 31, 2024, UEIC’s total current liabilities amounted to $138.67 million, compared to $161.15 million as of December 31, 2023.
For the quarter ending September 30, 2024, UEIC’s revenue and EPS are expected to increase 1.5% and 170.8% year-over-year to $108.69 million and $0.22, respectively. It surpassed consensus EPS estimates in each of the trailing four quarters, which is impressive. The stock has gained 33.8% over the past six months to close the last trading session at $10.56.
UEIC’s POWR Ratings reflect this positive outlook. It has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
UEIC has a B grade for Value. It is ranked #5 out of 43 stocks in the Technology - Electronics industry. Click here to see UEIC’s ratings for Growth, Momentum, Stability, Sentiment, and Quality.
Stock #2: Dolby Laboratories, Inc. (DLB)
DLB creates audio and imaging technologies that transform entertainment at the cinema, DTV transmissions and devices, mobile devices, OTT video and music services, home entertainment devices, and automobiles.
On May 29, 2024, DLB announced a partnership with VIZIO to integrate Dolby Atmos across VIZIO's 2024 soundbar lineup, offering advanced immersive sound experiences starting at $99. This initiative aims to make high-quality audio more accessible to a wider range of consumers.
DLB’s trailing-12-month CAPEX / Sales of 2.41% is 6.4% higher than the industry average of 2.27%. Likewise, its trailing-12-month EBIT margin and net income margin of 18.79% and 15% are 301% and 455.2% higher than the industry averages of 4.69% and 2.70%, respectively.
For the fiscal second quarter that ended March 29, 2024, DLB’s total revenue and gross profit stood at $364.52 million and $325.75 million, respectively. For the same quarter, its non-GAAP net income attributable to DLB and earnings per share increased marginally from the year-ago quarter to $123.19 million and $1.27, respectively.
Street expects DLB’s EPS for the quarter ending June 30, 2024, to increase 7.3% year-over-year to $0.59. Its revenue for the quarter ending September 30, 2024, is expected to rise 12.4% year-over-year to $326.60 million. The company surpassed consensus EPS estimates in each of the trailing four quarters. DLB has declined 1.4% over the past month, closing the last trading session at $78.23.
DLB’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to Buy in our proprietary rating system.
It has an A grade for Quality and a B for Sentiment. It is ranked #4 in the same industry. Get DLB’s Growth, Value, Momentum, and Stability ratings here.
Stock #1: Brother Industries, Ltd. (BRTHY)
BRTHY, headquartered in Nagoya, Japan, manufactures and sells communications and printing equipment internationally. It operates through the Printing & Solutions, Machinery, Domino, Nissei, Personal & Home, and Network & Contents segments.
BRTHY’s trailing-12-month EBITDA margin of 11.83% is 21% higher than the industry average of 9.78%. Its trailing-12-month Return on Total Capital and Return on Total Assets of 4.67% and 3.53% are 77.4% and 135.5% higher than the industry averages of 2.63% and 1.50%, respectively.
BRTHY’s revenue for the fiscal year that ended March 31, 2024, increased marginally year-over-year to ¥822.93 billion ($5.23 billion). The company’s gross profit grew 11.2% from the year-ago value to ¥355.34 billion ($2.26 billion). In addition, its profit for the year attributable to owners of the parent company stood at ¥31.65 billion ($201.05 million) and ¥123.48 per share, respectively.
Analysts expect BRTHY’s revenue for the quarter ending September 30, 2024, to increase 3.3% year-over-year to $1.37 billion. Over the past year, the stock has gained 26.7%, closing the last trading session at $37.19.
BRTHY’s POWR Ratings reflect its robust prospects. It has an overall A rating, equating to a Strong Buy in our proprietary rating system.
BRTHY has an A grade for Stability and a B for Value, Momentum, and Quality. Within the Technology - Electronics industry, it is ranked first. Click here for the additional POWR Ratings of BRTHY (Growth and Sentiment).
What To Do Next?
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DLB shares were trading at $77.82 per share on Thursday morning, down $0.41 (-0.52%). Year-to-date, DLB has declined -9.03%, versus a 10.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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