Here's Why Amphenol Stock Is a Buy Even With a Higher P/E of 29.36X

Core Insights - Amphenol (APH) shares are currently trading at a premium valuation with a Value Score of D, reflecting a 12-month price-to-earnings (P/E) ratio of 29.36X, which is higher than the Zacks Computer and Technology sector's 25.6X and the Zacks Electronics - Connectors industry's 29.04X [1][2] Valuation Comparison - APH's premium valuation is evident when compared to peers such as Belden Inc. (BDC), TE Connectivity (TEL), and Hubbell (HUBB), which have forward 12-month P/E ratios of 15.97X, 19.02X, and 24.45X respectively [2] Growth Prospects - The premium valuation of APH is supported by strong growth prospects, including accelerating revenues, margin expansion, and increased participation in high-growth markets like AI-driven IT datacom and defense [3] - Strong bookings momentum enhances long-term earnings visibility and growth sustainability [3] Stock Performance - Amphenol's stock has achieved a 21.7% gain over six months, outperforming the broader sector's 12.8% rise and key peers such as Hubbell, Belden, and TE Connectivity [7] - The stock's growth is attributed to AI-led IT datacom demand, record orders, and a strong book-to-bill ratio of 1.31 [9] Market Demand - The IT datacom segment contributed 38% of total revenues in the last quarter, showing significant year-over-year growth driven by AI-related data center demand [12] - The acquisition of CommScope's CCS business enhances Amphenol's capabilities in fiber-optic and high-speed interconnects, positioning the company as a key partner for complex AI and cloud architectures [13] Defense and Aerospace Growth - Amphenol benefits from strong demand in defense and commercial aerospace markets, with defense sales growing 44% year-over-year in the fourth quarter and 30% for the full year of 2025 [14] - Commercial aerospace sales also increased, driven by rising aircraft production and strong design-in positions across multiple jetliner platforms [15] Q1 2026 Guidance - For Q1 2026, Amphenol expects earnings between $0.91 and $0.93 per share, indicating year-over-year growth of 44% to 48%, with revenues anticipated between $6.90 billion and $7 billion, suggesting growth of 43% to 45% [17] - The Zacks Consensus Estimate for Q1 2026 earnings is pegged at $0.94 per share, reflecting a 49.21% growth over the previous year [18] Investment Recommendation - Despite the premium valuation, Amphenol's accelerating AI datacom exposure, defense and aerospace tailwinds, record bookings momentum, and strong earnings outlook reinforce durable growth visibility, making it a preferred stock to buy now [19]