Prepare for the Coming Industrial Boom Part 2 of 2 Part Series
Prepare for the Coming Industrial Boom Part 2 of 2 Part Series
By Matt Rego
In part 1, I discussed Timken Company (NYSE: TKR) and its well-positioned portfolio of anti-friction bearings, steel and power transmissions; all very important factors that factories will be looking to upgrade. In part 2, I will be discussing another important tool in today’s factories and manufacturing community: robots. These days, most of the world’s manufactured goods are made with the use of hi-tech robots rather than by hand. I believe Adept Technology, Inc. (NASDAQ: ADEP) has the answer. ADEP is an emerging growth company that has not posted a profit yet but analysts are predicting the company will experience explosive growth over the next five years.
As previously stated, Adept Technology provides a variety of intelligent robotic systems for a wide variety of uses including packaging, solar, medical industry, electronics/computer components and machine tool automation. The depth of variety of uses gives the company a diverse portfolio to present to clients. For instance, the American auto industry is booming right now and the Big Three Ford Motor Corporation (NYSE: F), General Motors Company (NYSE: GM) and Chrysler have all signaled some sort of factory expansion or upgrade. This is just one way that Adept Technology’s robots could come in handy and fuel the company’s growth.
ADEP recently released second quarter earnings for 2013 with numbers that were underwhelming. Bear in mind the capital expenditure revolution is just heating up and we are dealing with an emerging company in the sector. That being said, the company is in good enough financial health to weather any speed bumps that it might encounter until it finds its niche. ADEP has a market cap of $37.38 million and a forward price to earnings of 34.8. Furthermore, the company is undervalued compared to its sales with a price to sales of 0.66. ADEP has no debt and 0.65 cash per share, which translates to a current ratio of 2.58. Earnings are expected to rise 48 percent this year and 125 percent next year. As you can see, this is where the explosive growth is estimated. Analysts rate ADEP a hold right now with the average recommendation at 2 and a target price of $5.
As I have touched upon throughout the article, the company is a little more risky than some of its counterparts as it has not yet posted a profit. However, the broad expansion and revamping of America’s industrial sector will lift the suppliers of manufacturing components. Additionally, the company is well positioned for its size due to its lack of debt and wide variety of robots that it offers. Analysts are hesitant to give the stock a buy rating because of the lack of earnings but the growth rates could give a series of upgrades over the next year or two. The bottom line here is if you are looking for a longer term investment that offers a higher risk, higher reward scenario, Adept Technologies is something to consider.
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I think ADEP will outperform in the future. Robotics will definitely be the future in industrialization.
Very true. Robotics are the future. ADEP presents a good opportunity for growth-disposed investors.
Before I see lack of profit as a *big* problem for any company, I’ll look into the activities of the company over some quarters. It’s possible that the company is doing some improvements so as to become more efficient. I’ll also check if sales improved. After doing this, I’ll then judge the stock.
Checking the performance of competitors over the same quarters can also be insightful on what we can deduce from the lack of profits.
sales have fallen 15% Q/Q but its really about what is going to happen moving forward. Capital expenditures are starting to rise to 12 month highs and will only continue as cash hoarding companies need to upgrade their equipment.
Always enjoy your articles Matt. Very good series.