Artificial intelligence (AI) is arguably one of the hottest trends right now. Even though some Canadian AI stocks have shown promise, a promising opportunity lies in another segment of the tech sector. Robotics is even more niche than AI (which is rapidly becoming more mainstream), but Kraken Robotics (TSXV:PNG) seems very attractive right now for several reasons.
The company
Kraken Robotics is among the few robotics companies (especially in Canada) that are well outside the research phase. Their products are already deployed in the market and are being used by their target markets. They operate in a specific segment: underwater robotics and other technologies. The products/solutions in their portfolio include products for shallow-water surveys, seabed surveys, etc.
Many of these solutions have applications for various private and government entities (including the military). They have already worked with many prominent names in the private sector and government and regulatory bodies.
The stock
To say that the stock is soaring might be an understatement. It has gone up almost 280% in the last 12 months, and most of its growth occurred in the last one-and-a-half years. It’s overvalued, with a price-to-earnings ratio close to 60, but it wouldn’t be a stretch to call it reasonable, considering the pace of the stock’s growth.
The company has limited debt, and even though revenue fluctuates, gross profit has increased by a sizable margin in the last few quarters.
Another thing that makes it attractive is rapid insider buying. Insiders own about 4% of the company, and some are still actively buying. This shows management’s/insiders’ confidence in the company even though despite the modest 10% dip it experienced in the last few weeks.
While robotics has yet to see the light of day, there are speculations in the market that the field might experience a growth spurt similar to AI and become more mainstream. If it comes to pass, it would be even more promising for Kraken than other robotics stocks.
Partly because it’s one of the few well-known robotics stocks trading in Canada and also because its applications are already well-understood. Similarly, news related to the company’s organic growth, like new contracts signed or new additions to its solutions/product portfolio, can also accelerate the development.
Foolish takeaway
Despite its promising performance and strong potential, it’s important to understand that the risk/reward ratio of Kraken might be different compared to typical tech stocks. Other market forces and investor sentiments apply to it. However, the reward can also be disproportionately higher, as is evident from its recent growth phase.
