Biometric technology has become a security staple in our everyday lives and is likely to expand further as the technology improves. From fingerprint readers and facial recognition to body scanners and more, it has become entrenched in the lives of the modern consumer. Hence, biometric stocks have the potential to provide healthy returns over the next several years.
A recent study published by Global Industry Analysts Inc. highlighted how the global biometrics market is expected to steamroll to the $44.1 billion mark by 2026. The U.S. and China will lead the market and are expected to generate $5.7 billion and $7.3 billion, respectively. According to the report, the novel coronavirus pandemic forced many companies to rethink aspects of their businesses — and biometric solutions have been a big part of those changes.
Moreover, returning to normal will take a significant amount of time. A transition to something similar to the way things were will require a dribs and drabs approach, and biometrics will ease many of the pain points involving I.D. verification and other aspects.
Having said that, let’s look at three small-cap biometric stocks that could make a big splash in the coming years.
Biometric Stocks to Buy: Bio-key International (BKYI)
New Jersey-based Bio-key International is a micro-cap pure play in the biometrics industry. It develops a range of fingerprint scanners and credentialing and identity management software. The pandemic has proven to be a major catalyst for the company, with its second-quarter year-over-year revenue growth at an impressive 223%.
As it is still in its development stages, BKYI stock offers plenty of upside.
The company has plenty on its plate at this time, apart from the tailwinds from the massive work-from-home trend Covid-19 provided. These catalysts include $75 million in commercial and government contracts in Africa and its acquisition of PistolStar to scale its operations. From a fundamentals perspective, the company’s top-line growth has been staggering, growing by triple-digits in each of the past four quarters.
Moreover, as the company moves to a SaaS model, its margins are likely to improve significantly in the long run. Despite its risks, BKYI stock has the potential to perform over the long run.
Intellicheck is a leading I.D. authentication solutions provider and arguably the best-performing pure play in biometrics. The company has gone through a business turnaround which has proven to be hugely successful. Moreover, it has a strong moat in the sector, including its robust technology, high pricing power, and recurring sales. Therefore, IDN stock has an incredible growth runway ahead, making it an interesting long-term bet.
Fundamentals have been impressive, to say the least. Top-line growth has averaged an amazing 22% in the past five years. Moreover, its revenue growth this year is over 37% on a year-over-year basis. The company’s transition to an identity-authentication-as-a-service business model has proven to be exceptional for its margins and top-line growth.
With a strong demand among retailers and financial institutions for its services, it is likely to continue knocking it out of the park.
Biometric Stocks to Buy: Aware (AWRE)
Aware is a leading provider of biometrics software and services in the world. Though it generates most of its revenues from the government sector, it has begun seeing amazing success in the commercial biometrics field. It provides a comprehensive suite of I.D. verification and management platforms for physical and digital front security. Hence, AWRE stock is a fascinating biometrics play with plenty of upside potential.
The company’s massive government business includes clients such as the U.S. Department of Justice, Department of Defense, Homeland Security. Moreover, international government clients include the U.K. Metropolitan Police, Kingdom of Saudi Arabia, to name a few. It recently announced a partnership with Iris ID Systems for local agencies to use the Federal Bureau of Investigation’s cutting-edge Iris Service.
Furthermore, the company has been killing it of late financially. Its revenue growth is over 34%. Hence, Aware has a lot going for it at this time and has an exciting future ahead.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.