In This Article:
Objective Corporation Limited (ASX:OCL), is a AU$277.95M small-cap, which operates in the software industry based in Australia. The sector has significantly been impacted by technology megatrends, which have changed how industrial and consumer-oriented companies operate. Tech analysts are forecasting for the entire software tech industry, a positive double-digit growth of 15.20% in the upcoming year , and a whopping growth of 62.21% 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. Below, I will examine the sector growth prospects, and also determine whether Objective is a laggard or leader relative to its tech sector peers. See our latest analysis for Objective
What’s the catalyst for Objective’s sector growth?
Despite all the opportunities, tech companies still face a host of challenges, including coping with an increasingly burdensome global regulation. Since the regulatory environment is unlikely to become less complex, organizations will need to address the constantly evolving rules for governing privacy, security and handling of data, as well as cybersecurity issues. In the past year, the industry delivered growth in the teens, beating the Australian market growth of 6.90%. Objective leads the pack with its impressive earnings growth of 54.94% over the past year. This proven growth may make Objective a more expensive stock relative to its peers.
Is Objective and the sector relatively cheap?
The software tech industry is trading at a PE ratio of 34.3x, higher than the rest of the Australian stock market PE of 17.49x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry did return a higher 15.30% compared to the market’s 11.30%, which may be indicative of past tailwinds. On the stock-level, Objective is trading at a PE ratio of 33.6x, which is relatively in-line with the average tech stock. In terms of returns, Objective generated 38.45% in the past year, which is 23.15% over the tech sector.
Next Steps:
Objective recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders, and the stock is currently trading in-line with its peers. If the stock has been on your watchlist for a while, now may be the time to buy. If you like its proven ability to generate growth, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best opportunity. However, before you make a decision on the stock, I suggest you look at Objective’s fundamentals in order to build a holistic investment thesis.