To comfortably live in an online world, we need to make sure our actions and devices are secure. When dealing with our bank, for instance, we want to know the transactions are secure. We want to rest assured that information in our smartphones is safe, and that we can login quickly and securely into our tablets and laptops.

One obvious and widely used means of protecting data is by locking your device, thereby restricting unauthorized access. And modern “locks” are increasingly using our unique human features to establish our identification, a technology known as biometrics.  

#-ad_banner-#And when it comes to utilizing unique human features, what is easier and more convenient than your own fingerprints?  

Many iPhone owners would agree that their feeling of security significantly improved after Apple (Nasdaq: AAPL) introduced a fingerprint recognition feature in 2013. The adoption of Touch ID has proceeded smoothly, and improvements in the technology itself have proceeded apace —  today’s second-generation sensor is up to twice as fast as the original version.

Driven by the increasingly urgent need for security, as well as consumers’ smooth adoption of such sensors in mobile devices, the market for fingerprint sensors is on fire. According to a market research report last year (click here for more), the fingerprint sensors market is expected to reach $8.85 billion by 2022. This means that the market is expected to grow an average of 18.9% — every year — between 2016 and 2022.

Other factors driving this market forward are government initiatives to adopt biometrics for ID purposes, advances in mobile banking, growth of the cloud and Internet of Things (IoT), as well as growth in biometrics systems in criminal identification. Even car manufacturers are beginning to use touch technology. Mobile devices, however, are expected to lead the fingerprint sensors market in the next five years or so.

All of this means that biometrics companies are set up to become the best tech stocks to buy now — and beyond.

One Company Leads The Pack
The current leader in biometric technology is San Jose, Calif.-based Synaptics (Nasdaq: SYNA). From the technology’s early days, Synaptics has been a leader in touch displays. In its own words, Synaptics specializes in “human interface” — the way people interact with computers, communications devices and consumer electronics.

The company’s website offers an interactive timeline — from the founding of the company in 1986 to now — that showcases its achievements and breakthroughs, from the first notebook touchpads to touch-screen phones, to biometrics and fingerprint sensors, to display drivers able to deliver crystal-clear images with vivid colors while maximizing battery life, to the world’s first touch and display driver integration (TDDI). Among the latest technological achievements: the industry’s first fingerprint sensor fully certified by the Banking Card Test Center, which was assigned by China UnionPay (CUP) and other key banks to perform and manage fingerprint sensor certification testing.

Synaptics has also made major inroads into the fingerprint sensor world when it acquired biometrics developer Validity in October of 2013. And a 2014 strategic acquisition of Renesas SP Drivers from a Japanese consortium continued the company’s transformation into a touchscreen technology leader.

With its multiple product lines and long history in this sector of technology, it looks to me as if this small cap ($1.9 billion in market capitalization and about $1.6 billion in annual revenue) is set to remain among the top tech stocks for 2017 and the years to come.

A Game-Changer At A Discount
What is especially attractive with Synaptics is its valuation. The market assigns a forward P/E of 11 to its shares — compared with an average forward P/E of 20 among Nasdaq stocks — a bargain considering that its per-share profits are expected to grow at more than 12% over the next five years.

There is a reason for this low valuation, of course. Despite having some of the best and most secure technologies in the business, Synaptics faces significant competition. The very same companies that it lists as customers can, and often do, take the sensor and touch screen manufacturing in-house.

For instance, SYNA was one of the suppliers to Apple’s iPod, having designed and manufactured the Scroll/Touch Wheel as well as the Click Wheel (remember those?). Yet today, Synaptics doesn’t list Apple among its top customers.

The competition, therefore, keeps Synaptics on its toes. On the other hand, its smallish size and strong expertise would make it a potentially attractive acquisition for some of the leading phone or PC makers.

The low valuation also reflects the turnaround the company has made over the last year or so to keep itself among the top tech stocks.

For 2017, the company has continued to invest strategically, with particular focus on China, but has also reduced the size of its workforce. This region continues to be a bright spot, led by increasing momentum of our fingerprint authentication solutions, and the adoption of touch and display (TDDI) by Chinese liquid crystal display manufacturers.

This Company’s Time Is Finally Here
Indeed, the smartphone market continues to show promise, despite a slowing growth for high-end devices. The acceleration of fingerprint authentication technology into mid-range and low-end phones as well as growth in organic light emitting displays (OLED) create an inflection point for TDDI. SYNA expects that more than half of Android LCD smartphones will be based on TDDI by the end of calendar 2019, so TDDI and OLED represent significant growth engines for Synaptics in the smartphone market for years to come.

During the fiscal 2016 (ended June 30, 2016), SYNA used $241 million to repurchase approximately 10% of shares outstanding entering the year. Through July 2018, the board has authorized stock repurchases by a further $100 million, for a total current authorization of $233 million. This reflects the company’s belief that the market undervalues Synaptics’ shares, and that the company is poised for long-term success.

With its suite of products and pioneering technology, and a promise to expand beyond the smartphone and PC markets into automotive, wearables and PC peripherals, I believe this game-changer’s time is finally here. And at this price, SYNA looks very attractive. That’s why it will be the next addition to my Game-Changing Stocks portfolio.  

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