In This Article:
KeyBridge Capital Limited (ASX:KBC), a AU$15.81M small-cap, is a capital market firm operating in an industry, which has recently been facing serious existential threats resulting from potential disintermediation and disruption from new technology. Financial services analysts are forecasting for the entire industry, a relatively muted growth of 7.56% in the upcoming year , and a massive growth of 41.61% over the next couple of years. This rate is larger than the growth rate of the Australian stock market as a whole. Today, I will analyse the industry outlook, and also determine whether KeyBridge Capital is a laggard or leader relative to its financial sector peers. Check out our latest analysis for KeyBridge Capital
What’s the catalyst for KeyBridge Capital’s sector growth?
The threat of disintermediation in the capital markets industry is both real and imminent, taking profits away from traditional incumbent financial institutions. In the past year, the industry delivered growth of 6.89%, though still underperforming the wider Australian stock market. KeyBridge Capital lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means KeyBridge Capital may be trading cheaper than its peers.
Is KeyBridge Capital and the sector relatively cheap?
The capital markets industry is trading at a PE ratio of 23.43x, higher than the rest of the Australian stock market PE of 17.14x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a lower 8.62% compared to the market’s 11.85%, which may be indicative of past headwinds. Since KeyBridge Capital’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge KeyBridge Capital’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:
KeyBridge Capital has been a capital markets industry laggard in the past year. If KeyBridge Capital has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although it delivered lower growth relative to its financial peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. However, before you make a decision on the stock, I suggest you look at KeyBridge Capital’s fundamentals in order to build a holistic investment thesis.