IPG Photonics Corporation (IPGP) in Oxford, Mass., is the market leader in high-power fiber lasers and amplifiers that are utilized primarily in materials processing and various other applications. The company's board of directors recently approved the purchase of up to $200 million common shares. The approval supplements the company's current stock repurchase program, which was authorized in May 2020 and had approximately $80 million shares available for repurchase.

While the company reported stable financial performance in the last reported quarter, it failed to meet analysts' expectations for the coming quarters. The stock has declined 17.3% in price over the past three months and 7.7% over the past month. In addition, closing yesterday's trading session at $135.79, the stock is currently trading 43.8% below its 52-week high of $241.43, which it hit on March 09, 2021

Also, DA Davidson has lowered its price target for the company to $200.00 from $225.00.

Here is what could shape IPGP's performance in the near term:

Missed Analyst's Outlook estimates

The company anticipates revenue of $320 million - $350 million for the current quarter, with full-year revenue growth of between 3% and 6% compared to $1.46 billion in 2021. However, analysts expected sales of $368.3 million in the first quarter, and full-year revenue projections of $1.58 billion that would translate into a growth rate of little more than 8%. The discrepancy in projections impacted IPGP's price performance after the company released its recent quarterly report.

Mixed Profitability

IPGP's 47.7% trailing-12-months gross profit margin is 3.9% lower than the 49.6% industry average. Also, its 0.48% trailing-12-months asset turnover ratio is 25.5% lower than the 0.64% industry average.

However, IPGP's 19.1% trailing-12-months net income margin is 203.1% higher than the 6.3% industry average. Also, its trailing-12-months ROA and ROC are 127.4% and 63.1% higher than their respective industry averages.

POWR Ratings Reflect Uncertainty

IPGP has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. IPGP has a C grade for Stability and Momentum. The stock’s 1.35 beta is consistent with its  Stability grade. In addition, IPGP is currently trading below its 50-day and 200-day moving averages of $158.5 and $176.46, respectively, indicating a downtrend.

Among the 56 stocks in the C-rated Technology – Communication/Networking industry, IPGP is ranked #29.

Beyond what I have stated above, you can view IPGP ratings for Growth, Value, Quality, and Sentiment here.

Bottom Line

The company reported stable growth across its business segments in its latest earning release. However, it failed to meet analysts' expectations for the coming quarters' guidance. Consequently, analysts expect its EPS to decline 20.6% in the current quarter (ending March 2022). So, considering the recently lowered price target, we think investors should wait before scooping up its shares.

How Does IPG Photonics Corporation (IPGP) Stack Up Against its Peers?

While IPGP has an overall C rating, one might want to consider its industry peers, Extreme Networks Inc. (EXTR), Viavi Solutions Inc. (VIAV), and AudioCodes Ltd. (AUDC) which have an overall A (Strong Buy) rating.

IPGP shares were trading at $138.43 per share on Wednesday morning, up $2.64 (+1.94%). Year-to-date, IPGP has declined -19.58%, versus a -8.91% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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