A $1,000 investment in Keysight Technologies (KEYS -0.07%) five years ago is worth more than $5,600 now thanks to the consistent growth in the company's top and bottom lines. What's impressive is that Keysight has remained a top stock despite running into hiccups on account of the COVID-19 outbreak in 2020.

The networking test equipment manufacturer faced operational disruptions last year as the pandemic gripped the globe, triggering a decline in revenue and earnings as it had to halt production. However, Keysight has bounced back from last year's disappointment -- as its latest quarterly results indicate -- and is on track to get better. Let's look at the reasons why investors looking to buy a tech stock should consider it.

Two people sit at a table and look at a laptop screen.

Image source: Getty Images

Keysight crushes expectations as demand improves

The company's results have been improving as business activity has picked up in a post-pandemic scenario. The company delivered 23% year-over-year revenue growth in the third quarter of fiscal 2021 to reach a record $1.25 billion. Core revenue growth stood at 21% year over year after excluding the impact of currency changes and revenue from any businesses divested in the past year.

The company's non-GAAP (adjusted) net income increased to $1.54 per share during the quarter from $1.19 per share a year ago. It is worth noting that the results exceeded the higher end of the company's guidance. Keysight had originally guided for $1.42 per share in earnings on revenue of $1.21 billion, but strong growth in orders and the addition of new customers led to stronger-than-expected growth.

Keysight points out that it added 1,900 customers in 2020 and is on track to exceed that figure this year. What's more, the company exited Q3 with record orders. Its orders increased 23% year over year to $1.31 billion, which was a quarterly record. This makes three straight quarters of double-digit growth in revenue and orders.

Management pointed out on the latest earnings conference call that "order and revenue strength was notable across all markets and regions." Not surprisingly, Keysight expects its impressive momentum to spill over into 2022. However, the markets that the company caters to could help it sustain its high levels of growth beyond next year.

Why the stock is primed for more upside

Keysight's revenue and earnings are on track to clock a compound annual growth rate (CAGR) of 9% and 16%, respectively, from 2015 to 2021. However, it is worth noting that the company's growth this fiscal year will easily outpace its historical pace. It expects to finish fiscal 2021 with 16% revenue growth and a 24% spike in earnings over last year.

The good news is that Keysight serves three lucrative markets that could help it grow at a faster pace in the coming years as compared to the historical levels. The commercial communications business, which accounts for 48% of the company's total revenue, witnessed record orders last quarter thanks to the deployment of 5G networks, the increasing adoption of open radio access network (O-RAN), and the deployment of faster Ethernet in data centers.

The company now boasts of a solid customer base in the market for 5G chips, with the likes of Qualcomm, Samsung, Dell, and NEC deploying its solutions. Mordor Intelligence estimates that the 5G infrastructure market could clock a CAGR of 53% through 2026, indicating that the demand for Keysight's test and measurement solutions will continue to remain strong.

The booming demand for 5G chipsets is also driving impressive growth in Keysight's electronic industrial solutions group, which produced 30% of the top line last quarter and recorded a 48% year-over-year jump in revenue. The segment also benefited from record automotive orders last quarter. Investors can expect the automotive business to be a critical growth driver for Keysight in the future as the semiconductor content in vehicles increases.

IHS Markit estimates that the global automotive semiconductor market could hit $67.6 billion in revenue by 2026 as compared with $38 billion last year, so don't be surprised to see Keysight supply more of its design and test solutions to this space.

In all, it can be concluded that Keysight has a secular catalyst in the form of growing semiconductor demand across a wide range of verticals that could help it grow at a faster pace in the coming years. That's why investors who have missed its rally over the past five years shouldn't be disappointed, as it can replicate its performance going forward and remain a growth stock for a long time to come.