Rosslyn Data Technologies plc (AIM:RDT), is a £8.00M small-cap, which operates in the software industry based in United Kingdom. The sector has significantly been impacted by technology megatrends that will continue to shape the industry, which have changed how both industrial and consumer-oriented companies operate. For example, cloud computing has been swiftly adopted by many enterprises, and the Internet of Things have permeated throughout various industries. Tech analysts are forecasting for the entire software tech industry, negative growth in the upcoming year . An interesting question to explore is whether we can we benefit from entering into the tech sector right now. Today, I will analyse the industry outlook, and also determine whether Rosslyn Data Technologies is a laggard or leader relative to its tech sector peers. See our latest analysis for Rosslyn Data Technologies
What’s the catalyst for Rosslyn Data Technologies'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 UK market growth of 12.03%. Rosslyn Data 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 Rosslyn Data Technologies may be trading cheaper than its peers.
Is Rosslyn Data Technologies and the sector relatively cheap?
Software tech companies are typically trading at a PE of 29.5x, above the broader UK stock market PE of 18x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a similar 12.79% on equities compared to the market’s 12.79%. Since Rosslyn Data Technologies’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Rosslyn Data Technologies’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:Rosslyn Data Technologies's track record in earnings growth shows that it has been able to keep up with its peers. If the stock has been on your watchlist for a while, now may be the time to buy, if you are not already highly concentrated in the tech industry. However, before you make a decision on the stock, I suggest you look at Rosslyn Data Technologies's fundamentals in order to build a holistic investment thesis.
- 1. 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.
- 2. Historical Track Record: What has RDT'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.
- 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Rosslyn Data Technologies? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.