Connected IO Limited (ASX:CIO), is a AUDA$21.31M small-cap, which operates in the tech hardware industry based in Australia. Technology has become a vital component of every industry, bringing unprecedented opportunities for growth, along with challenges and competition. Tech analysts are forecasting for the entire hardware tech industry, a positive double-digit growth of 14.74% in the upcoming year . Today, I will analyse the industry outlook, as well as evaluate whether Connected IO is lagging or leading in the industry. Check out our latest analysis for Connected IO

What’s the catalyst for Connected IO’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. In the previous year, the industry endured negative growth of -32.88%, underperforming the Australian market growth of 6.89%. Connected IO 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 Connected IO may be trading cheaper than its peers.

Is Connected IO and the sector relatively cheap?

Tech hardware companies are typically trading at a PE of 28x, 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 returned a similar 12.06% on equities compared to the market’s 11.86%. Since Connected IO’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Connected IO’s value is to assume the stock should be relatively in-line with its industry.

What this means for you:

Are you a shareholder? Connected IO has been a tech industry laggard in the past year. If your initial investment thesis is around the growth prospects of Connected IO, there are other tech companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how Connected IO fits into your wider portfolio and the opportunity cost of holding onto the stock.

Are you a potential investor? If Connected IO has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its tech peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at Connected IO’s future cash flows in order to assess whether the stock is trading at a reasonable price.

For a deeper dive into Connected IO’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other tech stocks instead? Use our free playform to see my list of over 1000 other tech companies trading on the market.

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.