Connector Industry Profitability: A Decade of Consistent Growth and High Return on Equity
Over the past decade, the global connector industry has consistently achieved an impressive average net income of 10.5% of sales and a remarkable 15.5% return on equity (ROE), positioning itself as a top performer in the market.
The connector industry is renowned for its consistent performance, delivering double-digit net income (NI) and return on equity (ROE) year after year, making it a lucrative sector for investors and stakeholders alike. As shown in the chart below, over the past 10 years (2014 through 2023), the connector industry achieved an average net income of 10.5% of sales and 15.5% return on equity.
Leading connector companies such as TE Connectivity and Amphenol have been at the forefront, driving the industry’s profitability and setting benchmarks for others in the market.
Clearly the connector industry is exceptional, consistently achieving double-digit net income and return on equity over the past 10-year period. How does this compare to other industries?
The table below provides a comparative analysis of the 2023 net income across various industries, highlighting the competitive edge of the connector industry in terms of profitability.
In 2023, the connector industry ranked fourth overall in profitability out of the 14 industries we analyzed. Granted, this analysis is based on only one year, 2023, but an industry that consistently achieves double-digit net income and return on equity over the long term will always rank in the top of class.
Expanding on this, we thought it might be interesting to examine how sales performance, world GDP, and connector prices might affect industry profitability. In that regard, we prepared the following table.
Key insights from this data reveal important trends and patterns in the connector industry’s financial performance over the past decade.
- In the past 10 years, industry sales declined in four years: 2015, 2029, 2020, and 2023. Despite these declines, the connector industry still generated substantial profits.
- Except for 2015, where connector prices declined -2.0%, connector prices have increased or remained flat in the past 10 years. There was very little price erosion during this period.
- The industry remained profitable even in 2020 when GDP was -3.1% and connector sales were down -2.2%.
- The years 2021 and 2022 were exceptionally good years, which generated high double-digit ROE of 16.5% and 18.6, respectively. Sales increased +24.7% in 2021 and +7.8% in 2022. The industry was also able to increase connector prices by +7.0% in 2021 and +8.0% in 2022.
- Historically, price erosion has been a detriment to profits. Conversely, as demonstrated in 2021 and 2022, price increases can effectively drive profitability.
In conclusion, the connector industry continues to generate substantial profits and impressive return on equity, reinforcing its appeal to investors and acquisition-driven companies. This consistent profitability has made it a prime target for acquisitions, both within the industry and by private equity firms.
This content is available to subscribers of Connector Supplier through a special partnership with Bishop & Associates. No part of this article may be used without the permission of Bishop & Associates Inc. Subscribers to the Bishop Report receive monthly updates about the performance of the connector industry, subscribe to the Bishop Report here. You may also contact us at [email protected] or by calling 630.443.2702.
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