Best Robotics Stocks To Buy: Although tech stocks have taken substantial losses this year, there’s still a great deal of promise in the robotics market. Automation will likely be key to solving the current labor shortage among developed economies.
The companies that create robotics and automation solutions, as a result, will be able to reap substantial profits as manufacturing, healthcare and other fields adopt these technologies.
Robotics companies will also be able to tap into a growing consumer market in the coming years. While the demands will be different, companies with expertise in developing hardware and software for industrial applications will be positioned to offer products to consumers.
As a result, the robotics industry is one with ample long-term potential and many possible emerging business lines. Here are three of the best robotics stocks to buy now.
Fanuc (OTC:FANUY) is a Japanese company that specializes in robotics and automation for industrial applications, especially CNC equipment and machine tools. The company has seen strong growth as businesses around the world attempt to clear backlogs from the COVID-19 pandemic by turning to automation.
In the fiscal third quarter, Fanuc’s orders rose by 27 percent year-over-year, while operating income rose by 40 percent. Much of this growth story could be found in factory automation orders, which rose by an impressive 56 percent.
Operating margin did decline slightly to 24.4 percent from 25.2 percent in fiscal Q2. However, the margin was still up slightly year-over-year, alleviating any substantial concerns in this area.
Losses sustained so far this year have also left Fanuc valued almost perfectly in line with the broader robotics industry. The stock has lost about 18.8 percent YTD as technology stocks have struggled worldwide. This leaves Fanuc with a P/E ratio of 22.65 against an industry average of 23.85.
Price-to-book stands at 2.67 against an average of 2.29, while price-to-cash flow exactly matches the industry average of 23.63. Based on these metrics, we can conclude that Fanuc is neither overvalued nor undervalued relative to its industry.
Over the next 12 months, analyst price forecasts project a median return of 37.6 percent with the stock rising from $17.29 to $23.80. This combination of strong growth, fair pricing and robust potential upside makes Fanuc quite attractive for investors interested in robotics.
The fact that factory automation represents a large amount of Fanuc’s growth is especially encouraging. As factories continue to invest in modern automation technologies, Fanuc is arguably one of the companies best positioned to profit.
Intuitive Surgical (NASDAQ:ISRG) is the company behind the groundbreaking da Vinci surgical robot platform. This surgical robot is increasingly being used to perform surgeries in concert with human surgeons, bringing robotics into the lucrative medical field.
According to its Q4 reporting, Intuitive saw reasonable growth in 2021. Surgical procedures using the da Vinci platform increased by 19 percent worldwide, pointing to stronger adoption in clinical settings.
Units shipped rose by 18 percent year-over-year, leading to a total of 6,730 units installed. This led to a Q4 revenue of $1.55 billion, up 17 percent year-over-year.
The ongoing growth in installed systems is beneficial for Intuitive, as roughly 75 percent of its revenues are associated with recurring revenue streams on installed da Vinci systems. As more units work their way into the field, the company will steadily and reliably see an increase in this income stream.
Intuitive is also able to operate debt-free thanks to extremely strong cash flows. Free cash flow in 2021 was $1.74 billion, up more than 50 percent from 2020. The company also maintains a cash stockpile in excess of $8 billion, putting its balance sheet in very stable shape for the long run.
Intuitive has a less appreciable upside over the next 12 months, with analyst targets putting the stock up 16.3 percent from $289.74 to a median target of $337. Another possible downside of this stock is its pricing. Its valuation metrics are consistently higher than industry averages.
Putting all of this together, Intuitive is a company that appears to be a strong long-term bet. The 12-month upside isn’t as attractive as other robotics stocks, and it may take time for the company’s recurring revenue model to reach its maximum potential. With that said, surgical robotics is likely a field ripe for substantial growth in the coming years. Intuitive Surgical is clearly positioned as the dominant force in this area.
UiPath (NYSE:PATH) is a company that develops software for robotics and automation. While this places it in a different niche within the industry than many robotics companies, it also allows UiPath to take advantage of rapidly growing demand for such software products.
UiPath is currently the leader in this market space and appears to have enough of a moat to maintain its dominance for the foreseeable future.
UiPath has a high forecasted upside over the coming 12 months. The stock holds a median analyst price target of $35. This would give investors a 75.6 percent upside. UiPath also holds a consensus buy rating among 22 standing analysts.
UiPath, however, isn’t without drawbacks. The company’s stock has fallen significantly from its IPO price of $56, and its initial growth surge also appears to be slowing down.
The company had a significant presence in Russia which has been disrupted by the recent invasion of Ukraine. It also has encountered difficulties in maintaining its margin levels. Over the last year, gross margin has fallen from 89 percent to 81 percent.
All told, UiPath appears to be a solid contender, albeit a fairly risky one. Investors who buy this stock at its current pricing could see returns of over 50 percent, assuming analyst price forecasts hold and no further difficulties beset the company.
Declining growth and margins could present problems, but the losses of the last year have pushed the stock into territory where the risk is likely worth taking. It’s also worth noting that the margin slip still leaves UiPath with a very respectable gross margin of over 80 percent.
Summary: Which Is the Best Stock to Buy?
Although UiPath’s potential upside is obviously compelling, the best overall stock among these three is likely Fanuc. The company provides a good blend of growth and upside potential without being quite as risky as UiPath.
Intuitive Surgical is also an interesting case. Investors who buy this stock today will very likely underperform the other two over the coming year. However, Intuitive looks like a very strong long-term choice. As it ships more da Vinci systems, its recurring revenues will almost certainly continue to rise steadily. Overall, Intuitive has a business model that could make it an excellent long-term play on cutting-edge healthcare technology.
These stocks would also do reasonably well when blended together for a diversified robotics investment strategy. Buying Fanuc for more reliable growth, UiPath for potentially higher returns and Intuitive for long-term returns will likely allow investors to take advantage of all three stocks’ strengths.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.