Keysight Technologies (NYSE:KEYS) stock has been in fine form over the past three years, gaining more than 200% thanks to the consistent growth in the company's revenue and a big spike in earnings. The electronic equipment manufacturer has benefited from the rollout of fifth-generation (5G) wireless networks because it supplies network test equipment to telecom companies and other networking component suppliers.

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Keysight CEO Ron Nersesian admitted over the last earnings conference call that "5G has been a strong growth driver for us for over the past three years, and we continue to see new use cases and ongoing innovation as the ecosystem scales and adapts to a new technology."

However, 2020 turned out to be a subdued year for Keysight, as it had to shutter its manufacturing and order fulfillment operations under government direction to control the spread of the novel coronavirus pandemic. The good news is that the company is expected to regain its mojo in the new year.

Keysight Technologies is looking forward to a strong year

Keysight recently reported results for the fourth quarter of fiscal 2020 that ended on Oct. 31, 2020. The company's non-GAAP revenue for the full year was down 3% over the prior year to $4.22 billion as it had to scale down its operations in the second quarter of the fiscal year thanks to COVID-19.

However, Keysight finished the year on a strong note, with non-GAAP revenue (which excludes the impact of currency changes and businesses purchased or sold in trailing 12 months) rising 7% over the prior-year period to a record $1.22 billion. The company also saw a nice increase in the non-GAAP net income, which came in at $305 million ($1.62 per share), compared to $254 million in the year-ago quarter.

The improvement in Keysight's financial performance toward the end of the year isn't surprising, as the company started ramping up operations in the fiscal third quarter. At the same time, an increase in demand from end markets such as 5G, data centers, aerospace, and automotive helped the company deliver record revenue, orders, and margins.

Person holding a 5G smartphone.

Image source: Getty Images

Keysight's guidance for the current quarter indicates that its strong run is all set to continue. The company anticipates earnings between $1.32 and $1.38 per share this quarter on revenue of $1.14 billion to $1.16 billion. The company's revenue is on track to increase more than 5% year over year if it hits the midpoint of the guidance range, while the bottom line will also be in better shape compared to the year-ago period's figure of $1.26 per share.

The company didn't issue full-year revenue guidance. However, analyst estimates compiled by Yahoo! Finance indicate that Keysight could deliver double-digit percentage revenue growth this year, while earnings growth is expected to outpace top-line growth. That would be a big improvement over Keysight's fiscal 2020 performance, and it wouldn't be surprising to see the company step up its game this year thanks to a bunch of catalysts.

A look at the key growth drivers

Keysight gets its revenue from two segments: the communications solutions group (which also includes the aerospace, defense, and government business and accounts for 74% of total revenue), and the electronic industrial solutions group (which accounts for the remainder of the top line).

The deployment of 5G networks is going to remain a catalyst for the communications group this year as the technology is rolled out in more markets. According to GSMA Intelligence, 5G wireless networks are available in 48 countries across the globe, indicating that there are several countries the technology hasn't reached yet. More specifically, only 40% of the global mobile subscriber base now has access to 5G.

So there is a large addressable market for Keysight to tap into as demand for its products and services increases in markets the technology has yet to reach. Not surprisingly, the global 5G testing solutions space is expected to record 11.5% annual growth through 2024 according to Frost & Sullivan. This should help Keysight step up its growth rate in 2021 and beyond after last year's disappointing performance.

Similarly, the aerospace and defense markets are also expected to pick up the pace in 2021 and improve over last year. The good news for Keysight is that it is already witnessing a turnaround in this market, with aerospace, defense, and government revenue increasing 13% year over year in the fourth quarter of fiscal 2020.

All in all, Keysight looks well placed to deliver double-digit growth in the new fiscal year. That's why investors looking to buy a 5G stock to take advantage of the rollout of the new networking technology should keep Keysight within their sights, especially considering its valuation. The stock trades at 40 times trailing earnings, which is lower than the five-year average multiple of 44.4. And a forward price-to-earnings (P/E) ratio of 23.7 points toward an improved bottom-line performance that could help it deliver more upside in 2021, even after a tremendous run over the past three years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.