Airwork Holdings Limited (NZSE:AWK), a NZD$262.46M small-cap, is a transportation infrastructure company operating in an industry which has been constrained by the general squeeze on government since the global financial crisis. The shortfall highlights the challenge facing governments in sourcing additional funding and further involvement of the private sector in the provision of infrastructure is inevitable. Transport analysts are forecasting for the whole industry, a relatively muted growth of 1 percent in the upcoming year, and a robust short-term growth of 28 percent over the next couple of years. This rate is larger than the growth rate of the NZ stock market as a whole. Should your portfolio be overweight in the transport infrastructure sector at the moment? Today, I will analyse the industry outlook, and also determine whether AWK is a laggard or leader relative to its transportation sector peers. Check out our latest analysis for Airwork Holdings

What’s the catalyst for AWK's sector growth?

Recently, investment in technology is seen as a necessity in order to support inter-modality as transport networks get more complex and crowded. This disruption in the transportation industry increases the demand for improved infrastructure nationally. In the previous year, the industry saw growth in the twenties, beating the NZ market growth of 11 percent. AWK lags the pack with its negative growth rate of -1 percent over the past year, which indicates the company will be growing at a slower pace than its transportation infrastructure peers. As the company trails the rest of the industry in terms of growth, AWK may also be a cheaper stock relative to its peers.

Is AWK and the sector relatively cheap?

The transportation infrastructure industry is trading at a PE ratio of 25 times, above the broader NZ stock market PE of 17 times. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a lower 9 percent compared to the market’s 14 percent, which may be indicative of past headwinds. On the stock-level, AWK is trading at a lower PE ratio of 10 times, making it cheaper than the average transportation infrastructure stock. In terms of returns, AWK generated 21 percent in the past year, which is 12 percent over the transportation infrastructure sector.

What this means for you:

Are you a shareholder? AWK has been a transportation infrastructure industry laggard in the past year. This is possibly reflected in the PE ratio, with the stock trading below its peers. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto AWK as part of your portfolio, or maybe increase your holding. If you’re bearish on the stock, now may not be the best time to sell!