Allied Motion Technologies Inc (NASDAQ:AMOT), a US$490m small-cap, operates in the electrical equipment industry, which often track the broad economic cycle. During growth, businesses have excess cash, and are comfortable buying ancillary equipement. However, when economic conditions are challenging, businesses may try to repair equipment instead. Capital goods analysts are forecasting for the entire industry, a fairly unexciting growth rate of 5.9% in the upcoming year , and a massive growth of 55% over the next couple of years. the growth rate of the US stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether Allied Motion Technologies is a laggard or leader relative to its capital goods peers.
What’s the catalyst for Allied Motion Technologies’s sector growth?
Operating structures involve high fixed costs and fluctuating cost of raw materials, which impacts the companies’ earnings performance. In the previous year, the industry saw growth in the thirties, beating the US market growth of 18%. Allied Motion Technologies leads the pack with its impressive earnings growth of 38% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Allied Motion Technologies poised to deliver a 48% growth over the next couple of years compared to the industry’s 5.9%. This growth may make Allied Motion Technologies a more expensive stock relative to its peers.
Is Allied Motion Technologies and the sector relatively cheap?
The electrical equipment products sector’s PE is currently hovering around 18.76x, relatively similar to the rest of the US stock market PE of 20.28x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 10% on equities compared to the market’s 10%. On the stock-level, Allied Motion Technologies is trading at a higher PE ratio of 40.31x, making it more expensive than the average electrical equipment stock. In terms of returns, Allied Motion Technologies generated 12% in the past year, which is 1.8% over the electrical equipment sector.
Allied Motion Technologies’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If Allied Motion Technologies has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other electrical equipment companies. However, before you make a decision on the stock, I suggest you look at Allied Motion Technologies’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has AMOT’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Allied Motion Technologies? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.