Zhejiang RuiYuan Intelligent Control Technology Company Limited (SEHK:8249), is a HKDHK$142.50M small-cap, which operates in the tech hardware industry based in Hong Kong. The sector has significantly been impacted by technology megatrends, which have changed how industrial and consumer-oriented companies operate. Tech analysts are forecasting for the entire hardware tech industry, a strong double-digit growth of 17.75% in the upcoming year , and an enormous growth of 36.06% over the next couple of years. This rate is larger than the growth rate of the Hong Kong stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether Zhejiang RuiYuan Intelligent Control Technology is a laggard or leader relative to its tech sector peers. Check out our latest analysis for Zhejiang RuiYuan Intelligent Control Technology
What’s the catalyst for Zhejiang RuiYuan Intelligent Control Technology’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. Over the past year, the industry saw growth in the teens, beating the Hong Kong market growth of 11.29%. Zhejiang RuiYuan Intelligent Control Technology 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 Zhejiang RuiYuan Intelligent Control Technology may be trading cheaper than its peers.
Is Zhejiang RuiYuan Intelligent Control Technology and the sector relatively cheap?
Tech hardware companies are typically trading at a PE of 13x, in-line with the Hong Kong stock market PE of 14x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 11.90% on equities compared to the market’s 10.00%. Since Zhejiang RuiYuan Intelligent Control Technology’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Zhejiang RuiYuan Intelligent Control Technology’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Zhejiang RuiYuan Intelligent Control Technology has been a tech industry laggard in the past year. If your initial investment thesis is around the growth prospects of Zhejiang RuiYuan Intelligent Control Technology, there are other tech companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how Zhejiang RuiYuan Intelligent Control Technology fits into your wider portfolio and the opportunity cost of holding onto the stock.