Simple Concepts Research Group

What’s the Deal With SigmaTron International (NASDAQ: SGMA)?

by | Dec 13, 2021 | Stock Picks

SigmaTron International (SGMA) Company Overview & Stock Price Forecast

This article provides a brief analysis and stock rating for SigmaTron (SGMA) including an updated stock price target. Additional data on the company’s earnings yield, price/earnings ratio, return on invested capital and YTD performance are discussed as well.

SigmaTron International Fundamentals

SGMA Stock Rating

Stock Price Target: $22.61

In the section below, we discuss the earnings yield, P/E, return on invested capital and YTD performance for SigmaTron International in comparison to the Electronics industry and the S&P 500.

SigmaTron is a Micro Cap company with a Market Cap of $66.1M.

How are investors using SigmaTron earnings yield to assess the company?

SigmaTron (SGMA)_ Earnings Yield in Comparison to the Electronics Industry, S&P 500 and 10 Year Treasury Rate

The earnings yield is used to show the percentage of a company’s earnings per share. Investors typically use earnings yield to determine which assets are underpriced or overpriced relative to other variables, like sector, industry or bond yields. Simply put, the earnings yield of a company can be used to assess how expensive a company is in relation to the earnings that are generated. When valuing companies, the SIS Research Group does not utilize the inverse P/E ratio to calculate the earnings yield. Instead, we use an adjusted earning yield calculation to capture variation amongst companies (i.e. debt and tax rates).

The current earnings yield for SigmaTron is 17.36%, in comparison to 3.37% for the S&P 500 and 1.48% for the 10-year treasury bond. The median earnings yield for the Electronics industry is 5.36%.

What does SigmaTron Price-to-Earnings Ratio (P/E) tell investors about the company?

SigmaTron (SGMA)_ Price-to-Earnings, Price-to-Sales and Price-to-Book Value in Comparison to the Auto Retail Industry and the S&P 500

The price-to-earnings ratio (P/E) is a relatively popular metric used by investors and analysts for valuing a company’s stock. The P/E ratio can be used to show how a stock’s valuation compares to other companies and the total market. Investors use the P/E ratio to determine what the market is willing to pay today based on a company’s past or future earnings. A high P/E ratio could mean that a stock’s price is too high relative to earnings, which could be a signal that a stock is currently overvalued. In turn, a low P/E ratio could indicate that a company’s current stock price is low relative to earnings. 

SigmaTron is currently trading at a P/E of 3.12. The P/E for the Electronics industry is 22.11 and the P/E for the S&P 500 is 29.68.

What is the current Price-to-Sales Ratio (P/S) for SigmaTron?

The Price-to-Sales Ratio (P/S) looks at a company’s market cap and revenue to determine valuation. The P/S ratio is calculated by taking a company’s market cap and dividing by the total sales or revenue. The P/S ratio gives an idea of how much the market values every dollar of a company’s sales and can be effective in valuing unprofitable growth stocks or companies that are currently undergoing special situations or challenges. A lower the P/S ratio can be an indicator of good value.

SigmaTron is currently trading at a P/S of 0.12. The P/S for the Electronics industry is 2.39 and the P/S for the S&P 500 is 3.22.

How does SigmaTron Price-to-BookRatio (P/B) compare to the Electronics industry?

Price-to-book value (P/B) is the ratio of the market value of a company’s shares divided by its book value of equity (the value of it’s assets on the books). The book value is the difference between the book value of assets and liabilities. Typically, investors use the P/B ratio to assess if a stock is valued properly (a value of one means that the stock price is trading in line with the book value of the company). A company with a high P/B ratio could mean the stock price is overvalued as well as the converse.

SigmaTron P/B ratio is 0.57. The P/B for the Electronics industry is 4.14 and the P/B for the S&P 500 is 4.86.

How attractive is SigmaTron Return on Invested Capital (ROIC) to investors?

SigmaTron (SGMA stock)_ Return on Invested Capital in Comparison to the Electronics Industry and the S&P 500

Investors use the return on invested capital (ROIC) to assess how efficient a company is at turning capital into profits. The ROIC is the amount of money a company makes on it’s investments that is above the average cost of debt and equity.

Investors can use the ROIC to provide context for metrics like the (P/E) ratio. For instance, when used in isolation a low P/E ratio could suggest a company is oversold but the decline could be because a company is no longer generating value for shareholders. Conversely, companies that consistently generate high rates of ROIC can plausibly trade at a premium compared to other stocks, even if their P/E ratios are high.

SigmaTron ROIC is currently 10% in comparison to 9.76% for the Electronics industry and 8.60% for the S&P 500.

What is SigmaTron YTD Performance in comparison to its industry and the total market?

The year-to-date (YTD) performance is the amount of profit/loss realized by a stock since the first trading day of the current calendar year. 

The YTD performance for SigmaTron is 219.23%. The Electronics industry has a YTD performance of 31.27% in comparison to the YTD S&P 500 performance of 25.45%.

SigmaTron (SGMA)_ YTD Performance in Comparison to the Electronics Industry and the S&P 500

Recent Financial Results

  • Revenues increased $30.6M, or 44%, to $100.2M in the second quarter of fiscal 2022 from $69.6M for the same quarter in the prior year
  • Net income for the second quarter of $3.15M compared to $626,858 for the same period in the prior year
  • Basic and diluted earnings per share of $0.73 and $0.69 compared to $0.15 each for the same quarter in the previous year
  • Company anticipates closing the pending Wagz acquisition by the end of 2021

Stock Price Target: $22.61

Company Overview

SGMA Stock Rating

SigmaTron International operates as an independent provider of electronic manufacturing services (EMS). Its EMS services include printed circuit board assemblies and completely assembled (box-build) electronic products. The company also offers automatic and manual assembly, testing of products and assistance in obtaining product approval from governmental and other regulatory bodies.

SigmaTron primarily serves industrial electronics, consumer electronics, and medical/life sciences industries in the US and internationally. The company markets its services through independent manufacturers’ representative organizations. SigmaTron was incorporated in 1993 and is headquartered in Elk Grove Village, Illinois. The current CEO is Gary Fairhead.

Be sure to add SigmaTron International (SGMA stock) to your Watch List and if you haven’t done so already, check in on the performance of our Current Portfolio. Keep it simple and always do your due diligence.

This material is provided for informational purposes only and is not financial advice. The information contained herein should not solely be used for the formation of an investment decision, whether you are a long term or short term investor.