Spreedbox Holdings Limited (ASX:SBX), is a AUDA$185.00K small-cap, which operates in the software industry based in Australia. Whether it’s the next big thing in tech or an alliance with a partner in another industry, tech companies have plenty of opportunities for their companies to thrive. Tech analysts are forecasting for the entire software tech industry, an extremely robust growth of 45.26% in the upcoming year , and an enormous growth of 94.70% over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the Australian stock market as a whole. Today, I’ll take you through the tech sector growth expectations, and also determine whether Spreedbox Holdings is a laggard or leader relative to its tech sector peers. View our latest analysis for Spreedbox Holdings
What’s the catalyst for Spreedbox Holdings’s sector growth?
US-based mega-competitors have been, and continue to be, the key drivers of industry growth. Many tech companies are repositioning themselves by focusing on high-growth areas such as IBM’s artificial intelligence play in Watson and Adobe’s shift to marketing its product for cloud computing. In the past year, the industry delivered negative growth of -0.10%, underperforming the Australian market growth of 6.88%. Given the lack of analyst consensus in Spreedbox Holdings’s outlook, we could potentially assume the stock’s growth rate broadly follows its software industry peers. This means it is an attractive growth stock relative to the wider Australian stock market.
Is Spreedbox Holdings and the sector relatively cheap?
Software tech companies are typically trading at a PE of 35x, higher than the rest of the Australian stock market PE of 18x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry did return a higher 14.32% compared to the market’s 11.87%, which may be indicative of past tailwinds. Since Spreedbox Holdings’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Spreedbox Holdings’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? tech stocks are currently expected to grow faster than the average stock on the index. This means if you’re overweight in this sector, your portfolio will be tilted towards high-growth. However, the sector is also relatively more expensive, which may be reflective of this high growth expectation. If you’re currently concentrated in tech, it may be worth revisiting your investment thesis for each stock.