One of the best ways to ensure you make excellent gains is to get ahead of new trends. Hence, in the last year, we have seen tremendous growth in companies attached to 5G, artificial intelligence, data analytics and the internet of things (IoT). Robotics stocks are also part of this trend, which will transform the way we live for the better.
According to one report, the robotics market will increase to $176.8 billion by 2025 from $76.6 billion in 2020, representing a CAGR of 18.2%.
Admittedly, this investment area is for those that do not mind a bit of risk. Since we are still at the early stage of robotics massively transforming our lives, pouring capital in this area can feel like exploring the great unknown.
The same was once said for companies like PayPal (NASDAQ:PYPL) and Square (NYSE:SQ), though. Both these companies entered the market with a determination to change the online financial services industry.
And they have.
Along the way, they have rewarded investors handsomely. However, the reward is greater for robotics because it will have a massive impact on logistics, manufacturing and healthcare — along with basically everything else you can think of.
Besides, the addition of service robots will lead to increased productivity, better work safety and streamlined processes.
Without further ado, let’s take a deep dive among some of the heavy hitters in this space.
- ABB (NYSE:ABB)
- iRobot Corporation (NASDAQ:IRBT)
- Nuance Communications (NASDAQ:NUAN)
- Teradyne (NASDAQ:TER)
- Intuitive Surgical (NASDAQ:ISRG)
Robotics Stocks: ABB (ABB)
In recent decades, there has been an impressive increase in the number of robotics and automation companies.
However, ABB, our first entry in this list of robotics stocks, was formed in 1883. Power and automation technologies are its main claim to fame, but it has its fingers in several pies, including but not limited to utilities, industrial automation, infrastructure and discrete automation.
Last year, the company announced that Singapore’s government would use its robots to help Covid-19 contact tracing. That’s just one of the many ways the company’s innovative solutions improve our daily lives.
ABB is also collaborating with IBM. Under their partnership, the two companies have produced a new and OT Security Event Monitoring Service to help improve security processes for industrial operators.
Okay, enough talk about the partnership. Let’s take a look at the fundamentals.
First, for a stock that operates in a high-growth industry, it’s pretty cheap, trading at about 13.2x trailing price-to-sales. In the last eight quarters, it has reported seven earnings beats, per CNBC data. All of its operating metrics are excellent.
However, it deserves particular praise for its enviable December 2020 return on equity of 35.71%, comparing very favorably to the S&P 500 average of around 14%.
All in all, one of the best robotics stocks out there.
Our next entry hits closer to home; iRobot is a consumer robot company with the highest-selling robotic vacuum cleaners. The company is recognized for its Roomba product — a series of autonomous robotic vacuum cleaners.
It recently launched a new line of home appliances, including the Roomba i3+ vacuum with automatic dirt disposal, Wi-Fi-connected mapping and intelligent navigation.
While the novel coronavirus pandemic did a number on several companies and industries, iRobot performed exceptionally during the crisis. Last year, sales and EPS both increased.
Although it’s a bit more expensive than some of the other companies on this list, IRBT is still an excellent investment to have in your portfolio.
Nuance Communications (NUAN)
Nuance Communications focuses on speech recognition and artificial intelligence. One of its most famous products is Siri, the voice assistant on Apple (NASDAQ:AAPL) devices, including the iPhone.
Earlier this month, a blockbuster merger was announced between the company and Microsoft (NASDAQ:MSFT).
Bloomberg first reported that the two entities were in talks for a merger, and within a few days, the two companies announced a formal merger.
Microsoft will pay $19.7 billion to acquire the speech-to-text software leader; the price tag should give you some indication as to how highly the company values the target. The tech titan said it believes the merger will increase its footprint in the healthcare vertical.
I expect the stock to continue doing well in the interim thanks to two main reasons. One is the enthusiasm surrounding the merger. The other is the merger arbitrage opportunity.
In the run-up to the merger, expect the stock price to rise as investors generally take a long position in the target company.
One of the more diversified companies in the space, Teradyne is one of the must-have robotics stocks out there. And it’s easy to see why.
The bulk of its revenues come from semiconductor, system and wireless tests in the industrial, communications, automotive, electronics and defense industries.
That’s all fine and dandy, but you may be asking yourself where robotics fits into all of this. In 2018, Teradyne acquired Mobile Industrial Robots (MiR), a company looking to automate low-value transportation tasks.
The next year saw the company make another strategic purchase in the automation space in the shape of AutoGuide Mobile Robots, which makes “modular autonomous mobile tuggers and forklifts for high-payload material transport.”
All things considered, the company offers a curveball way to invest in robotics. Operating numbers otherwise are solid, though. Despite semiconductor chip shortages, the company managed to increase revenues by 16% year-over-year in the fourth quarter of 2020 and 36% for the full year.
The only thing going against the stock is that it’s a bit expensive, trading at 24.4 times on the morning of April 22, 2021.
Still, you will get bang for your buck, considering the company’s aggressive expansionist streak.
Intuitive Surgical (ISRG)
We close out this list with a stock that deserves a lot of attention, purely because it operates in a significant niche.
Intuitive Surgical is a California-based manufacturer of robotic-assisted technology and tools for surgery. Its main claim to fame is the da Vinci product, which medical professionals use to conduct minimally invasive surgeries.
With over five million surgeries performed, this “robot surgeon” is the real deal. In the U.S., the company has 3,500 installations, and globally the tally is over 5,500.
Last year sales declined, but that makes sense. Covid-19 forced medical institutions to divert their resources to responding and managing the virus. In Q4, the company reported revenues of $1.33 billion, a 4% year-on-year increase. It’s a positive sign that things are on the mend.
Overall, the company is a stable performer with access to smooth recurring cash flow. It also has a lot of room to expand its operations, especially in emerging economies.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence.