The Zacks Commercial Printing industry has been benefiting from strong demand for office products, labels, directories, catalogs and document management services, along with increased promotional activities for products. Growing digitization and the use of technologically advanced equipment bode well for the industry participants.
However, the growing popularity of online media and high innovation investments have marred the outlook of the industry participants. The pandemic-led supply-chain issues, inflation in raw materials and difficulty in sourcing skilled labor remain concerning for the industry. Kornit Digital Ltd. KRNT, Issuer Direct Corporation ISDR and Research Solutions, Inc. RSSS are a few stocks with healthy prospects.
About the Industry
The Zacks Commercial Printing industry comprises companies that are primarily engaged in providing customized printed products and graphic designs. The commercial printing companies serve large corporates, decorators, online businesses and graphic professionals, among others. Some of the products offered by the industry participants are digital printing systems, associated software, ink and other consumables, as well as value-added services. Some printing companies are engaged in providing technologies and services for document management to customers in the retail, technology, financial services, architectural, engineering, construction, food, entertainment and hospitality industries. These companies have been increasing investments in developing innovative technologies, boosting customer and employee experience, and supply-chain modernization programs.
3 Trends Shaping the Future of the Commercial Printing Industry
Strong Demand Environment: The commercial printing industry has been benefiting from an improvement in consumer sentiment over the past few quarters. An increase in personal income due to a strengthening economy, availability of higher-wage jobs and lower taxes have been gradually improving consumer spending. This, in turn, has boosted business opportunities for product manufacturers. In order to meet the rising demand for their products and stay competitive, manufacturers are heavily using products and services such as advertising materials from commercial printing companies. In addition to advertising, commercial printers are seeing growth opportunities in printing office products, directories, labels, catalogs, documents management services, and others. Such diversification in revenue sources has been helping the industry participants to mitigate concentration risks.
Technological Advancement Benefits: The industry participants have been benefiting from the growing digitization and the use of technologically advanced equipment. Digitization has been enabling the companies to gain detailed insight into their operational performance, demand cycles, supply-chain issues, and delivery status. These have been enabling them to enhance their operational productivity, customer service and lower costs, thus, boosting their competitiveness in the market.
Strict Competition: The growing preference for online media in the advertising industry has threatened the commercial printing industry. The companies have also been subject to intense competitive pressure from big and small players, as well as equipment manufacturers that offer similar services. Also, the companies bank on heavy investments in equipment and talent to keep pace with changing technologies and derive economies of scale. However, these often make them highly leveraged and force small firms to go out of business or to collaborate with larger ones. Also, the companies have been witnessing supply-chain challenges and inflation in raw materials and other expenses, which have been weighing on their margins and profitability.
Zacks Industry Rank Indicates Healthy Prospects
The Commercial Printing industry is a 3-stock group within the broader Zacks Industrial Products sector. The industry currently carries a Zacks Industry Rank #102, which places it in the top 40% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates healthy near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few promising stocks from the industry, it is worth taking a look at the industry’s performance and the valuation picture.
Industry Underperforms S&P 500 & Sector
The Zacks Commercial Printing industry has underperformed its sector and the S&P 500 over the past year. The stocks in this space have collectively lost 29% compared with the Zacks Industrial Products sector’s decline of 19.8% and the S&P 500’s fall of 2%.
One-Year Price Performance
Commercial Printing Industry’s Valuation
The Price/Earnings (P/E) ratio is commonly used for valuing commercial printing stocks.
The industry’s forward 12-month P/E ratio is 31.4. This clearly shows that the industry is trading above the S&P 500’s forward 12-month P/E ratio of 17.3 and the sector’s 15.1.
Over the past five years, the industry has traded at the highest level of 133.36X forward 12-month P/E and the lowest level of 6.73X. The median level over the same period was 36.77X.
Commercial Printing Industry’s Valuation Versus S&P 500
Commercial Printing Industry’s Valuation Versus Sector
3 Commercial Printing Stocks in Focus
Below we have discussed three stocks from the industry, carrying a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Kornit Digital: Headquartered in Rosh Haayin, Israel, the company is engaged in developing, manufacturing and marketing digital printing solutions for the printed textile industry worldwide. The company stands to gain from a strong product portfolio, solid demand environment for its products and solutions, and focus on its operational efficiency in the quarters ahead. However, high costs and operating expenses might be concerning.
Shares of KRNT have declined 37.1% in the past year. Kornit Digital’s earnings beat estimates once in the last four quarters, met the same once and missed twice. KRNT’s earnings estimates have been unchanged at $1.05 for 2022 in the past 60 days.
Price and Consensus: KRNT
Issuer Direct: Based in Raleigh, NC, the company specializes in offering shareholder communications and compliance platforms, technologies, and services. ISDR is poised to benefit from strengthening demand for products and solutions, a healthy liquidity position, and shareholder-friendly policies in the coming quarters. However, rising expenses and high costs related to sales and marketing are expected to hurt its short-term earnings.
The company’s shares have declined 26.9% in the past year. Its earnings beat estimates twice in the last four quarters and missed in the other two, the surprise being 21.51%, on average. In the past 60 days, the company’s earnings estimates have been unchanged at $1.09 for 2022.
Price and Consensus: ISDR
Research Solutions: The Henderson, NV-based company is engaged in providing workflow efficiency solutions for research-intensive organizations in life sciences, technology and academia industries throughout the world. It stands to gain from healthy demand for its products and solutions, coupled with a focus on operational execution and a solid liquidity position.
Shares of RSSS have lost 12.9% in the past year. Research Solutions’ bottom line met estimates in the last reported quarter. RSSS’s bottom-line estimates for fiscal 2022 (ending June 2022) have been unchanged in the past 60 days.
Price and Consensus: RSSS
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