Ookami Limited (ASX:OOK), is a AUDA$13.13M small-cap, which operates in the software industry based in Australia. In the past decade, mega-tech companies, have built highly successful and ubiquitous platforms and ecosystem in which smaller companies gravitate towards. Tech analysts are forecasting for the entire software tech industry, a highly optimistic growth of 45.26% in the upcoming year , and a whopping 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, as well as evaluate whether Ookami is lagging or leading in the industry. Check out our latest analysis for Ookami
What’s the catalyst for Ookami’s sector growth?
US-based mega-competitors, such as Alphabet, Apple and Facebook, have been and appears to 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 negative growth of -0.10%, underperforming the Australian market growth of 6.82%. Ookami 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 Ookami may be trading cheaper than its peers.
Is Ookami 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 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. Since Ookami’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Ookami’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Ookami has been a tech industry laggard in the past year. If your initial investment thesis is around the growth prospects of Ookami, there are other tech companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how Ookami fits into your wider portfolio and the opportunity cost of holding onto the stock.