PeoplesHR Limited (ASX:PHR), is a AUDA$36.49M small-cap, which operates in the software industry based in Singapore. As various enterprises look to technology to enable their own transformations, the opportunities for technology companies have widened extensively. Tech analysts are forecasting for the entire software tech industry, an extremely robust growth of 45.26% in the upcoming year , and a massive 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. Below, I will examine the sector growth prospects, as well as evaluate whether PeoplesHR is lagging or leading in the industry. Check out our latest analysis for PeoplesHR
What’s the catalyst for PeoplesHR’s sector growth?
The battle for competitive advantage has led businesses to adopt new the cutting-edge technology, or risk being left behind. Many technologies are now coming into their own as their power and speed increase and the cost of delivering them goes down. And some are pursing growth through various strategies including new M&A, collaboration and alliances, as well as cost reduction and organic growth. Over the past year, the industry saw negative growth of -0.10%, underperforming the Australian market growth of 6.90%. Given the lack of analyst consensus in PeoplesHR’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 PeoplesHR and the sector relatively cheap?
Software tech companies are typically trading at a PE of 35x, above the broader Australian stock market PE of 18x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry did return a higher 14.32% compared to the market’s 11.87%, which may be indicative of past tailwinds. On the stock-level, PeoplesHR is trading at a lower PE ratio of 29x, making it cheaper than the average tech stock.
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.
Are you a potential investor? If you’ve been keeping an eye on the tech sector, you may have just missed the boat on high growth potential as the market seems to have well and truly priced it into these stocks. The sector is relatively more expensive than the rest of the market which makes it less attractive to enter into companies like PeoplesHR right now.