Tags: Amphenol | return | growth | APH

Amphenol Seen Well Positioned for a Return to Growth

By Greg Brown   |   Monday, 06 Aug 2012 08:22 PM

Amphenol (APH) is a company whose prospects mesh directly and firmly into both private and public economic spheres. Its products are closely linked with a wide variety of sectors, as well as with government spending. That diversity can be a strength in a normal economy, and analysts see it well-positioned for a return to growth once the economy regains its footing.

Amphenol is one of the world’s largest designers, manufacturers and marketers of electrical, electronic and fiber optic connectors, interconnect systems and coaxial and high-speed specialty cable.

The primary end markets for the company’s products are information technology and communication systems for the converging technologies of voice, video and data communications.

It also makes a broad range of industrial applications, including factory automation and motion control systems, medical and industrial instrumentation, mass transportation, alternative and traditional energy generation, natural resource exploration and traditional and hybrid-electrical automotive applications.

Finally, the company manufactures commercial aerospace and military applications.

“The company’s strategy is to provide its customers with comprehensive design capabilities, a broad selection of products and a high level of service on a worldwide basis while maintaining continuing programs of productivity improvement and cost control,” management said in a recent filing.

Amphenol has a market cap of $9.63 billion in a sector, electronic equipment, instruments and components, where the average company size is $2.86 billion. Its trailing 12-month P/E ratio is 19.23 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.54, compared to 0.11 for the sector.

Its projected earnings per share growth for the coming year is 10.85 percent, compared to a sector average of 47.77 percent.

Soft patch


Wall Street is bullish on APH, with buy or outperform calls from Deutsche Bank, RBC Capital Markets, Smith Barney, and Standard & Poor’s Equity Research.

“Based on our macroeconomic and fundamental views, and our relative P/E model, we view APH as undervalued. Although APH has recently faced moderating trends in its two-year-old business revival, we think this will prove to be a soft patch,” S&P analysts wrote in early August.

“We have a positive view of APH's long-term prospects, on what we expect to be an ongoing expansion of the global communications infrastructure, increasing sophistication of military and space systems, and the use of more electronic devices in automobiles and other industrial products.”

Amphenol next reports on Oct. 17.

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