Amphenol manufactures electrical, electronic and fiber optic connectors, interconnect systems and coaxial and flat ribbon cable that primarily conduct electrical and optical signals for a wide range of sophisticated electronic applications for the factory automation, machine tool, instrumentation, telecommunication and medical systems industry. The company has generated an 18%-20% return on equity over the last five years while growing earnings at a 20%+ pace and dividends at a slightly slower rate. APH should be able to continue this record of success because:
- The company is experiencing broad-based growth both geographically and in its end markets as a result of improved end-market demand, gains in market share and new product rollouts
- Its global presence allows it to service multinational customers.
- A focused acquisition strategy, which focuses on high growth geographic areas [China, Mexico, India, Eastern Europe] and further improves the company’s pricing power and cost savings.
Negatives:
- Revenue will be impacted by a slowdown in military sales due to budget constraints,
- 61% of its business is international and therefore subject to the whims of currency translation problems.
APH has a debt/equity ratio of approximately 34%, is rated B++ by Value Line and its stock yields .1%.
| Stock Yield | Dividend Growth Rate | Payout Ratio | # Increases Since 2001 | ||
| APH | .1% | 15% | 3% | 1* | |
| IND Ave | .2 | 5 | 5 | NA | |
| Debt/Equity | ROE | EPS Down Since 2001 | Net Margin | Value Line Rating | |
| APH | 34% | 22% | 2 | 14% | B++ |
| IND Ave | 23 | 8 | NA | 4 | NA |
*APH has only paid a dividend for 5 years
Chart Note: APH stock made good progress off its March 2009 low, quickly surpassing the down trend off its August 2008 high (red line) and the November 2008 trading high (green line). While the Market was making its August lows, the stock broke its long-term up trend (straight blue lines); however, it quickly found initial support and has held that level (purple line). The wiggly blue lines are Bollinger Bands. The Aggressive Growth Portfolio owns a full position in APH and the stock is currently on the Aggressive Growth Buy List. The upper boundary of its Buy Value Range is $49; the lower boundary of its Sell Half Range is $74.
(Click chart to enlarge)
Disclosure: I am long APH.
