Is ATI Airtest Technologies Inc (CVE:AAT) Cheap And High Growth?

Simply Wall St
January 09, 2018

ATI Airtest Technologies Inc (TSXV:AAT), is a CADCA$1.04M small-cap, which operates in the tech hardware industry based in Canada. Technology has become a vital component of every industry, bringing unprecedented opportunities for growth, along with challenges and competition from traditional and emerging areas. Innovations such as augmented and virtual reality, blockchain, machine learning and autonomous vehicles are paving the way for tech sector growth and branching out into new applications. Tech analysts are forecasting for the entire hardware tech industry, an extremely robust growth of 62.65% in the upcoming year . Should your portfolio be overweight in the tech sector at the moment? In this article, I’ll take you through the tech sector growth expectations, as well as evaluate whether ATI Airtest Technologies is lagging or leading its competitors in the industry. See our latest analysis for ATI Airtest Technologies

What’s the catalyst for ATI Airtest Technologies's sector growth?

TSXV:AAT Past Future Earnings Jan 10th 18
TSXV:AAT Past Future Earnings Jan 10th 18
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 past year, the industry delivered negative growth of -14.73%, underperforming the Canadian market growth of 11.18%. ATI Airtest Technologies 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 ATI Airtest Technologies may be trading cheaper than its peers.

Is ATI Airtest Technologies and the sector relatively cheap?

TSXV:AAT PE PEG Gauge Jan 10th 18
TSXV:AAT PE PEG Gauge Jan 10th 18
Tech hardware companies are typically trading at a PE of 43x, higher than the rest of the Canadian stock market PE of 17x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a similar 8.23% on equities compared to the market’s 9.20%. Since ATI Airtest Technologies’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge ATI Airtest Technologies’s value is to assume the stock should be relatively in-line with its industry.

What this means for you:

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

Are you a potential investor? If ATI Airtest Technologies 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 ATI Airtest Technologies’s future cash flows in order to assess whether the stock is trading at a reasonable price.

For a deeper dive into ATI Airtest Technologies'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.

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Simply Wall St has no position in any of the companies mentioned. This article is general in nature. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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