Panorama Synergy Limited (ASX:PSY), is a AUDA$46.34M small-cap, which operates in the software industry based in Australia. Whether it’s the next big thing in tech such as artificial intelligence and robotics, or an alliance with a partner in another industry, for example healthcare or manufacturing, tech companies have plenty of opportunities for their companies to thrive. Tech analysts are forecasting for the entire software tech industry, a strong double-digit growth of 18.70% in the upcoming year , and a massive growth of 67.48% 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. Is the tech industry an attractive sector-play right now? Today, I will analyse the industry outlook, as well as evaluate whether PSY is lagging or leading its competitors in the industry. See our latest analysis for PSY
What’s the catalyst for PSY’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 5.37%. PSY 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 PSY may be trading cheaper than its peers.
Is PSY and the sector relatively cheap?
Software tech companies are typically trading at a PE of 35x, above the broader Australian stock market PE of 17x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry did return a higher 18.70% compared to the market’s 11.92%, which may be indicative of past tailwinds. Since PSY’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge PSY’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? PSY has been a tech industry laggard in the past year. If your initial investment thesis is around the growth prospects of PSY, there are other tech companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how PSY fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If PSY 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 PSY’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Panorama Synergy’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.