5 International Mid-Cap Robotics Stocks
Nobody does automation like the Japanese. From robots delivering food in popular chain restaurants to thermostats that will draw you a bath and tell you when it’s ready, the country is light years ahead of most. In many cases, Japanese automation addresses specific cultural use cases that just haven’t caught on abroad. Similarly, cultural differences in how companies operate mean that investing in Japanese companies as a foreigner isn’t easy.
In our recent piece on three of the largest industrial robotics companies out there, we shortlisted FANUC (6954.T) as a company of interest noting its profile more resembles value than growth. That leaves us with eleven names from our list of 14 promising robotics companies, five of which are Japanese firms that fall outside the scope of what we’re looking for. If we want Japanese robotics exposure, we’ll invest in FANUC. That leaves us with the six international firms seen below.
|Renishaw PLC||RSW.L||3.4||United Kingdom|
|John Bean Tech||JBT||3.4||United States|
|FARO Technologies||FARO||0.5||United States|
Credit: Nanalyze / data from Yahoo Finance
FARO Technologies drops off the list because it’s too small. We’re left with five mid-cap robotics stocks from five different countries. It’s important to note these are classified as “robotics stocks” by the two largest robotics ETF providers, though some might disagree as to the amount of pure-play exposure you’re actually receiving. With that in mind, let’s take a closer look at each company (numbers in USD unless otherwise stated).
While half of their 2022 annual report contains nothing but arbitrary ESG drivel, about five pages provide a verbose description of what the company does. At a revenue segment level, the business is broken down into “Life Sciences” and “Partnering” where the latter involves partners bringing Tecan’s solutions to market under their own brand names. What solutions? Pages 24-29 of their 2022 annual report define their total addressable markets (TAMs) which sum to about $22 billion and run the gamut from laboratory automation instruments to in-vitro diagnostics.
- Life Science Research ($4-5 billion) – laboratory automation segment with consumables, service, and spare parts
- In-Vitro Diagnostics ($4 billion) – dominated by sales to diagnostics companies with reagents/consumables (80%) and instruments (20%).
- Medical Mechatronics ($13-15 billion) – part of the broader medical device market and consists of instruments and mechanical and robotic modules controlled by custom electronics.
Segmenting their revenues by the above categories would make a lot of sense, but instead, you need a secret decoder wheel to figure out where revenues are actually coming from aside from the aforementioned vague “Life Sciences” and “Partnering” buckets.
A large focus of their recent investor presentation is the acquisition of a firm called Paramit which “more than doubled” Tecan’s original total addressable market in an area called “medical mechatronics.” Products include sub-modules for robotic surgery systems, energy based devices and platforms, cardiovascular controllers, portable defibrillators, home hemodialysis systems, patient monitoring, and telemedicine devices. One of their capabilities allows for “parallel screening of hundreds of antibody interactions,” something that sounds similar to the AbCellera (ABCL) value proposition. Overall drivers of above-average growth are said to be genomics, protein analysis, particularly workflows of mass spectrometry, and cell and tissue analysis.
Regarding our own portfolio exposure, there’s an overlap here with what BICO Group (BICO.ST) does in terms of laboratory automation exposure. If we were looking for additional life sciences robotics exposure, we’d lean towards Intuitive Surgical (ISRG). Investors on the sidelines choosing between BICO Group and Tecan Group might opt for the latter given their larger size, provided they could overlook the loss of 3D-bioprinting exposure you get with BICO.
Renishaw breaks down revenues into two segments – 1) Manufacturing Technologies and 2) Analytical Instruments and Medical Devices – the latter constituting just 5% of total revenues. Focusing on Manufacturing Technologies, we see three sub-segments, one of which is additive manufacturing.
Trying to understand how robotics comes into play is difficult. External sources tell us about cobot and robot hardware components that Renishaw manufactures along with a robotic surgical device that can be found in their miniscule medical device segment. ChatGPT helped us uncover some collaborations between FANUC and Renishaw, though these hardly seem to be major contributors towards revenues. You might make more of a case that Renishaw is an additive manufacturing firm, and indeed it’s found in ARK Invest’s 3D-Printing ETF (15th largest holding with a weighting of 3.47%), but without knowing how much revenue is coming from these sub-segments, it’s impossible to tell.
John Bean Tech
“JBT to explore a pure-play FoodTech strategy,” is the first reason the company gives as to why we ought to invest in the firm. They’re currently not a pure play because a quarter of revenues come from AeroTech with the remainder located below in the food chain, so to speak.
With an over 50,000 global install base of machinery, nearly half the company’s revenues are recurring, representing parts, consumables, refurbishments, leases, and service. Over the next three years they’re expecting to use up to $1.3 billion in fixed-rate debt to acquire additional growth in their FoodTech segment along with a predictive maintenance solution they’ve developed called OmniBlu. While the latest investor deck hints at a move towards a pure play on FoodTech, it becomes confusing later on as the slides talk up the potential of their AeroTech division which they’re supposed to be moving away from.
People always need to eat, so there’s a certain appeal to FoodTech, but John Bean is hardly young and fresh. With a heritage going back to 1884, they may find it tough to establish leading-edge technologies in their domain without acquiring some exciting venture capital-backed technologies that could help them steal market share from large players in this space like Tetra Pak or GEA Group. Like the next two companies on our list, there seems to be a lack of “blue ocean” opportunity in the robotics/automation technologies being discussed.
ATS addresses the “specialized automation product manufacturing requirements” of companies across a variety of industries with more than half their revenues coming from life sciences. Organic revenues grew at a compound annual growth rate (CAGR) of nearly 9% over the past five years, growth that’s been supplemented by consistent acquisitions over time leading to nearly $1 billion in debt on their balance sheet. Leverage isn’t necessarily a bad thing for a profitable company, but ATS has also accumulated around $1.2 billion in goodwill and intangible assets that suggest they may be overpaying for growth. Also of concern is a business model where the majority of revenues come from “construction contracts” as opposed to sales of products or services. The result is a blended gross margin of around 28% which is among the lowest in today’s list alongside our last company, Cargotec.
|2022 Gross Margin||Simple Valuation Ratio|
Cargotec is a global leader in cargo-handling machinery for ships, ports, terminals, and local distribution. It’s a profitable company that has market leadership positions in key geographies, but not one that appears to be doing much disruption aside from their electric vehicle portfolio and talk of acquiring growth in the future. Last year, the company began a restructuring initiative which focused on identifying core businesses that are growing and profitable while establishing plans to exit the rest when market conditions allow.
We use the term growth loosely, as the firm has historically seen growth around the 6% range with non-core businesses suffering from declining growth.
Green investors might find the “eco portfolio” attractive as it’s experiencing growth above the company’s overall product portfolio of which it now constitutes over 30%. With a new CEO on board this year, focus is said to be placed on robotics, electrification, and digitalization. The restructuring efforts should eventually lead to divesting less profitable business segments which should shore up their weak gross margin.
Thematic ETF providers often find a lack of pure-play constituents and resort to stretching the limits of what one might consider to be a robotics company. Industrial automation is a mature business segment that doesn’t represent the sort of robotics technology we’re looking to get exposure to. There’s a difference between consolidating old-school companies in a particular domain versus buying exciting venture capital-backed robotics technology companies that might represent large multi-billion dollar TAMs that are just around the corner. We didn’t find any of today’s companies to be an overly compelling replacement for our existing investment in Teradyne (TER).
Tech investing is extremely risky. Minimize your risk with our stock research, investment tools, and portfolios, and find out which tech stocks you should avoid. Become a Nanalyze Premium member and find out today!
In 2017 Nanalyze covered robotic exoskeleton stocks. One of them was ReWalk Robotics (RWLK). It produces ReWalk 6.0 robotic exoskeleton that can assist those who have suffered a spinal cord injury Obviously the stock lost a lot of value since then, but there are signs the company is moving in the right direction, so there may be a path to profitability down the road. It also has a lot more cash than its current market value (1.7x).
Market cap of $40 million is way way way too small.