Vuzix Corporation (VUZI) and Himax Technologies, Inc. (HIMX) are two of the leading providers of augmented reality (AR) wearable display and image processing technologies in the United States, Europe and internationally. VUZI offers AR smart glasses products with 3D, binocular next generation smart glasses and waveguide optics. HIMX provides display driver integrated circuits, controllers for touch sensor displays, and wafer level optics for AR devices, among other applications.
The increasing demand for remote assistance and the deepening penetration of AR technology in smartphones and automobiles is propelling the growth of the augmented reality industry. Augmented reality provides an interactive experience of a real-world environment in which the objects that exist in the real world are enhanced by computer-generated perceptual information. For example, the healthcare industry is using AR smart glasses to perform surgeries and provide virtual training services.
With more businesses exploring the potential of AR technology to offer a customized and interactive experience to their clients, VUZI and HIMX are expected to see rising demand.
VUZI has gained 184.1% so far this year, while HIMX has returned 73.1% over the same period. Also, in terms of past month performance, VUZI is the clear winner with 16.6% gains versus HIMX’s 2.7%. But which of these stocks is a better pick now? Let’s find out.
Latest Movements
This month, VUZI closed a public offering of 4.77 million shares of its common stock at $20.50 per share. The offering’s proceeds were $97.75 million, which VUZI plans to use for new product development, technology purchases, expansion of product offerings, and other corporate purposes.
Last month, the company entered a partnership with TechSee, a leading intelligent visual assistance technology company, to offer visual assistance solutions to field service technicians using AR on VUZI's M400 and M4000 smart glasses. The partnership should create a pioneering solution for enterprises that can benefit from the use of AR and computer vision.
In March, HIMX teamed up with BOE Varitronix Limited to deliver a next generation flexible AMOLED automotive display solution design-win with a leading new energy vehicle maker. HIMX also plans to offer comprehensive automotive product portfolios for TFT-LCD displays so they can be adopted by automotive manufacturers and Tier-1 car brands.
Recent Financial Results
During the fourth quarter, ended December 31, 2020, VUZI’s total revenue increased 116.9% year-over-year to $4.23 million, due mainly to higher sales of smart glass products and engineering services. However, the company’s total operating expenses rose 4.7% from the prior-year quarter to $5.51 million. Its loss from operations was $4.8 million, while its net loss was $3.59 million for this period. Also, the company’s loss per share was $0.09.
In the fourth quarter, ended December 31, HIMX reported record revenues of $275.8 million, representing an increase of 57.6% year-over-year. The company’s gross margin was 31.2% compared to 22.3% in the third quarter 2020. HIMX’s revenue from large display drivers was $64.2 million, up 15.2% sequentially. It reported an operating income of $42.19 million, compared to an operating loss of $1.34 million in the prior year quarter.
Past and Expected Financial Performance
VUZI’s revenue has increased at a CAGR of 27.9% over the past three years. In comparison, HIMX’s revenue grew at an annualized rate of 9% over this period. However, VUZI’s EBITDA has decreased by 31.1% over the past 12 months, while HIMX’s EBITDA increased 2159.2% over this period.
VUZI’s revenue is expected to rise 87.8% in the current year, and 86.5 % next year. Consensus EPS estimates indicate a 32.1% improvement in the current year and 27.8% in its fiscal year 2022. In comparison, analysts expect HIMX’s revenue to increase 37.8% in its fiscal year 2021 and 4.7% in 2022. Also, the company’s EPS is estimated to increase 316.7% in the current year and 25% over the next five years.
Profitability
HIMX’s trailing-12-month revenue is significantly higher than VUZI’s. Also, HIMX is more profitable with a gross profit margin of 24.9% versus VUZI’s 16.6%.
Also, HIMX’s levered free cash flow margin of 15.7% compares favorably with VUZI’s negative returns.
Valuation
In terms of trailing-12-month Price/Sales, VUZI is currently trading at 84.90x, which is significantly higher than HIMX, which is currently trading at 2.49x. Also, its forward EV/Sales of 72.84x is significantly higher than HIMX’s 1.78x.
So, HIMX is the more affordable stock.
POWR Ratings
HIMX has an overall B rating, which equates to a Buy in our proprietary POWR Ratings system. However, VUZI has an overall F rating, which translates to Strong Sell. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
In terms of Value Grade, HIMX has an A, consistent with its lower-than-industry P/E ratio. But VUZI’s Value Grade of F is reflective of its higher-than-industry EV/Sales ratio.
HIMX has a Sentiment Grade of A, in sync with analysts’ expectations of an increase in earnings and revenue. In comparison, VUZI has a Sentiment Grade of C.
Both HIMX and VUZI have a Momentum Grades of B, consistent with their price returns so far this year.
Of the 99 stocks in the B-rated Semiconductor & Wireless Chip industry, HIMX is ranked #11. VUZI is ranked #42 of 44 stocks in the B-rated Technology – Electronics industry.
In addition to the grades we’ve highlighted, our POWR Ratings system has also rated both HIMX and VUZI for Growth, Stability, and Quality. Get all HIMX ratings here. Also, click here to see the additional POWR Ratings for VUZI.
The Winner
With wide-scale adoption in various sectors of the economy, augmented reality is emerging as the “next big thing.” So, both HIMX and VUZI can be considered good long-term investments. However, HIMX appears to be a better buy based on the factors discussed here. We think that its new display technology launches and diversified vendor pool as well as superior financials should help it perform better in the near term.
Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to learn about the top-rated stocks in the Semiconductor & Wireless Chip industry. Also, click here to access the top-rated stocks in the Technology – Electronics industry.
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VUZI shares were trading at $22.81 per share on Thursday afternoon, down $2.99 (-11.59%). Year-to-date, VUZI has gained 151.21%, versus a 11.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
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