Frontier Digital Ventures Limited (ASX:FDV), is a AU$155.10M small-cap, which operates in the software industry based in Malaysia. In the past decade, the mega-tech companies, such as Amazon and Microsoft, have built highly successful and ubiquitous platforms and ecosystem in which smaller companies gravitate towards. Other hardware and software tech service firms, including many that dominated before 2000, are struggling to compete, and are going through significant restructuring in order to move away from their legacy systems. Tech analysts are forecasting for the entire software tech industry, an extremely elevated growth of 39.43% in the upcoming year , and an enormous triple-digit earnings growth 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 now the right time to pick up some shares in tech companies? Today, I will analyse the industry outlook, as well as evaluate whether Frontier Digital Ventures is lagging or leading its competitors in the industry. Check out our latest analysis for Frontier Digital Ventures
What’s the catalyst for Frontier Digital Ventures’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 previous year, the industry saw growth in the thirties, beating the Australian market growth of 9.60%. Frontier Digital Ventures lags the pack with its earnings falling by more than half over the past year, which indicates the company will be growing at a slower pace than its software peers. However, in the upcoming year, Frontier Digital Ventures is expected to deliver growth in-line with its industry peers, at a growth rate of 38.61%.
Is Frontier Digital Ventures and the sector relatively cheap?
Software tech companies are typically trading at a PE of 29.06x, above the broader Australian stock market PE of 17.35x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry returned a lower 9.10% compared to the market’s 11.70%, which may be indicative of past headwinds. Since Frontier Digital Ventures’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Frontier Digital Ventures’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:Frontier Digital Ventures’s future growth prospect shows that it is able to keep up with its peers. If Frontier Digital Ventures has been on your watchlist for a while, now may be the time to enter into the stock, if you like its growth prospects and are not highly concentrated in the tech industry. However, before you make a decision on the stock, I suggest you look at Frontier Digital Ventures’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has FDV’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Frontier Digital Ventures? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!