IPG Photonics Stock Riding High on Multiple Growth Drivers
Today’s stock represents another of our favorite strategies for investing—gaining from the rise of China. Emerging markets represent one of the best ways to put multi-baggers into one’s investing basket and the boom in China is a great opportunity to do just that. There are few good stocks that can help investors realize their dream of achieving triple-digit returns. Being the world’s second-largest economy, with ambitious plans for growth and investment, China offers these stocks to post phenomenal gains as its economy posts high growth.
IPG Photonics Corporation (NASDAQ:IPGP) is one such stock. The company is a leading player in developing a broad line of high-performance fiber lasers, fiber amplifiers etc. that are used for diverse applications, mainly in materials processing. Fiber lasers are popular for their performance and reliability. IPG’s diverse lines of low-, mid-, and high-power lasers and amplifiers are used in materials processing, advanced communications, and medical applications. Given the dominant position of the company in its core materials processing market, IPGP stock has more room for growth.
I am bullish on IPGP stock for the following reasons.
The fiber lasers are fast replacing conventional lasers as well as non-laser-based technologies, and will continue to post phenomenal growth in the coming years. Laser technology has completely transformed a number of products and applications in different industries like manufacturing, automotive, communications, and medical. As these industries continue to adopt this fiber laser technology and improve their performance, IPG stock will grow further. Moreover, one of the strongest growth drivers is the China market’s increasing demand for the technology provided by IPG Photonics.
China has been increasing its spending on infrastructure and has big plans for its automotive market. As per a report by China Money Network, the world’s second-largest economy has plans to spend about $2.0 trillion on its transportation and infrastructure by the year 2020. (Source: “China Plans To Spend $2 trillion On Transportation, Infrastructure By 2020,” China Money Network, March 1, 2017.)
Such big investments in railways, airports, and roads require the expertise of companies like IPG Photonics. The company has been winning market share and new accounts in cutting, welding, additive manufacturing, and other applications. With its high-output power lasers, IPG has been enabling its customers to enhance productivity and work on a wide range of thicker metals. Moreover, IPG has been focusing on new applications for materials processing like nanostructuring and 3D printing, all of which bodes well for IPGP stock.
Last month, the company announced phenomenal second-quarter results, which were driven by rapid growth in its core products and geographies. The IPGP stock continues to gain from the increasing adoption of its fiber lasers. The company posted record revenue at around $369.0 million, which is an increase of 46% year-over-year, as well as record net income with earnings per diluted share going up by 53% year-over-year.
Most of the geographies posted impressive growth but the strongest sales growth was from China, which almost doubled. It represented about half of the total revenue in the quarter, and with the China demand expected to grow further, IPGP stock investors could look forward to more gains.
IPG Photonics crossed the $1.0-billion sales threshold for the first time in 2016 and is en route to set more records in the coming years. With a growing business, IPG stock has also been flying high of late. Over the past one year, IPGP stock has posted returns of over 118% with five-year returns coming at over 200%. The following stock chart shows this stellar run.
Chart courtesy of StockCharts.com
IPG Photonics is the leading player in the fiber laser technology space, with a diverse base of customers and applications. Things will keep on getting better for the business as more and more companies in different industries adopt the latest in laser technology. The demand from China will keep the business and IPGP stock buoyant in the coming years. However, since IPG Photonics stock is trading near record highs at present, investors could consider investing on dips.