The Hottest Trend in Electronics Just May Surprise You
The newest trend makes a winner out of this stock
The trend toward voice-assist interaction in consumer electronics wouldn’t be possible without micro-electromechanical systems (MEMS) microphones.
New products are incorporating more microphones to improve clarity and recording when sound comes from different directions.
There was just one microphone in the first iPhone, but there were four in the iPhone 6s. Motorola’s Droid Turbo has five mics, and Amazon’s smart speaker Echo has seven.
Research firm IHS forecasts the MEMS market could grow from 3.6 billion units last year to over 6 billion in 2019.
The market value of industry sales could rise at a compound annual rate of 13% to $1.3 billion through 2019.
Knowles Corp (KN) is the runaway leader in the space, with 59% of the MEMS microphone market, and is a supplier to Apple, Samsung and Amazon. The company has been making audio electronics for over 70 years, and was spun off from Dover Corporation in 2014.
The company is also the market leader in acoustic components within hearing aids, and holds a strong position in capacitor products used in medical implants.
Nearly two-thirds (61%) of 2015 sales were from MEMS, with the rest booked in its specialty components segment.
Revenue has slipped by 11% over the last two years as microphone component prices become cheaper.
The company has also booked restructuring charges over the last few years in order to consolidate its manufacturing and improve profitability.
Shares currently trade for 19.5 times trailing earnings. Forward earnings are expected to jump 42% to $1.01 per share.
Even a conservative 17-times multiple means a 24% increase in the shares to $17.17 each, which seems likely, as the company stands to improve fundamentals significantly and benefit from market growth.
By Joseph Hogue
Source: Street Authority
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