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Is Advanced Energy (AEIS) Stock Due for a Breakout?

Zacks Equity Research
Updated
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Shares of Advanced Energy Industries, Inc. AEIS are down approximately 5.5% so far this year. Will this negative trend continue or is the stock due for a breakout?

Before we discuss the likely future performance of the stock, let’s a quick look at what has been troubling Advanced Energy stock.

While there are no tangible company-specific factors that can be held responsible for the price decline, the dismal performance of the broader technology sector appears to have taken a toll on the stock’s performance.

It has been a bumpy ride for the technology sector so far this year, thanks to a slew of bad news — including the Russian hacking of computers at the 2018 Olympics, data misuse scandal at Facebook FB, and the first casualty by a driverless car. This has dealt a massive blow to the share prices of even tech heavyweights, including Facebook, Apple AAPL and Alphabet GOOGL.

 


 

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While any reversal of the sector’s performance is yet to be seen, it’s worth taking a look at Advanced Energy’s fundamentals to determine if it has the potential to rebound.

Solid Earnings and Revenue Surprise Streak

The company has a nice streak of beating quarterly earnings and revenue estimates. The stock has surpassed the consensus estimates for both earnings and revenues in the trailing eight quarters. In fact, the past eight quarterly reports reflect a decent year-over-year improvement in top and bottom lines. This indicates that the company’s growth initiatives are on the right track.

Advanced Energy is benefiting from design wins and order pick up in the semiconductor industry due to the continuous growing investment in expanding 3D NAND capacity. We anticipate the need for memory to remain strong due to immense volume of data generated through smartphones and Internet-connected devices, along with the increasing adoption of artificial intelligence and cloud computing.

Impressive Estimate Revisions

Earnings estimates for Advanced Energy have been trending higher lately, reflecting an impressive earnings outlook. The estimates for first quarter and full-year 2018 have gone up in the last 90 days.

For the first quarter, the Zacks Consensus Estimate for earnings has moved higher approximately 11% in the last 90 days and is currently pegged at $1.32 per share. Similarly, estimates for 2018 have increased 5.7% to $5.21 per share in the same time frame.

Attractive Valuation

The recent plunge in Advanced Energy has made it cheaper. The stock currently trades at 12.3X of its 2018 EPS estimate, lower than the sector average of 19.7. Over the past year, the stock’s forward P/E has been as high as 23.07X and as low as 12.25X, with a median of 17.86X. So it appears that there is a solid value-oriented path ahead.

Furthermore, Advanced Energy has a Zacks VGM Style Score of B. The VGM Style Score is simply a weighted combination of Zacks Value, Growth and Momentum scores. Our research shows, stocks with a VGM score of A or B are in better position to gain in the near term.

Bottom Line

Although, shares of Advanced Energy have depreciated in recent times, the aforementioned metrics indicate a potential rebound in the near term.

Moreover, Advanced Energy currently has a Zacks Rank #3 (Hold), but that could change if the company keeps its earnings streak alive in the to-be-reported quarter. Improved analyst sentiment might help the stock tread on a growth trajectory after its upcoming earnings release.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Advanced Energy Industries, Inc. (AEIS) : Free Stock Analysis Report
 
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Zacks Investment Research