In This Article:
Elica Sp.A. (BIT:ELC), a €141.78M small-cap, is a consumer discretionary company operating in an industry, whose sales are driven primarily by consumer sentiment and access to capital. These macro factors tend to determine the rate at which consumers purchase big-ticket durable items. Consumer discretionary analysts are forecasting for the entire industry, a positive double-digit growth of 21.53% in the upcoming year , and an optimistic near-term growth of 21.75% over the next couple of years. However, this rate came in below the growth rate of the IT stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether Elica is a laggard or leader relative to its consumer discretionary sector peers. View our latest analysis for Elica
What’s the catalyst for Elica’s sector growth?
E-commerce continues to be the fastest growing sales platform for consumer discretionary goods, changing the landscape for retailers. A large number of store closures and bankruptcies illustrates the shift in consumer preferences and increasing online competition. Over the past year, the industry saw growth of 0.72%, though still underperforming the wider IT stock market. Elica leads the pack with its impressive industry-beating growth rate of of over 100% in the upcoming year.
Is Elica and the sector relatively cheap?
The household durables sector’s PE is currently hovering around 21.71x, relatively similar to the rest of the IT stock market PE of 20.79x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 14.51% compared to the market’s 10.68%, potentially illustrative of past tailwinds. On the stock-level, Elica is trading at a higher PE ratio of 854x, making it more expensive than the average household durables stock. In terms of returns, Elica generated 1.33% in the past year, which is 13.17% below the household durables sector.
Next Steps:
Elica’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If Elica has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other household durables companies. However, before you make a decision on the stock, I suggest you look at Elica’s fundamentals in order to build a holistic investment thesis.