333D Limited (ASX:T3D), is a AUD$5.13M small-cap, which operates in the tech hardware 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 hardware tech, industry, a positive double-digit growth of 10.85% in the upcoming year, and an optimistic near-term growth of 23.03% over the next couple of years. However, this rate came in below the growth rate of the Australian stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether T3D is a laggard or leader relative to its tech sector peers. View our latest analysis for 333D
What’s the catalyst for T3D'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 -11.77%, underperforming the Australian market growth of -4.59%. T3D leads the pack with its impressive earnings growth of 76.78% over the past year. This proven growth may make T3D a more expensive stock relative to its peers.
Is T3D and the sector relatively cheap?
Tech hardware companies are typically trading at a PE of 21x, relatively similar to the rest of the Australian stock market PE of 16x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 8.43% compared to the market’s 11.92%, potentially indicative of past headwinds. Since T3D’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge T3D’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? T3D recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto T3D as part of your portfolio. However, if you’re relatively concentrated in tech, you may want to value T3D based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If T3D has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the tech industry. Before you make a decision on the stock, take a look at T3D’s cash flows and assess whether the stock is trading at a fair price.