Are You Backing The Right Horse With Northamber plc (LON:NAR)?

Northamber plc (AIM:NAR), is a £7.60M small-cap, which operates in the tech hardware industry based in United Kingdom. The past two decades have experienced unprecedented changes in technology, and the next decade looks equally drastic. While mobile and cloud computing become ubiquitous, there is a new wave of advancement emerging from innovations such as machine learning, robotics and augmented reality. Tech analysts are forecasting for the entire hardware tech industry, a relatively muted growth of 1.02% in the upcoming year , and a single-digit 4.97% growth over the next couple of years. This rate is below the growth rate of the UK stock market as a whole. Is now the right time to pick up some shares in tech companies? Below, I will examine the sector growth prospects, as well as evaluate whether Northamber is lagging or leading its competitors in the industry. See our latest analysis for Northamber

What’s the catalyst for Northamber’s sector growth?

AIM:NAR Past Future Earnings Jan 29th 18
AIM:NAR Past Future Earnings Jan 29th 18
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 of over 50%, beating the UK market growth of 12.03%. Northamber 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 Northamber may be trading cheaper than its peers.

Is Northamber and the sector relatively cheap?

AIM:NAR PE PEG Gauge Jan 29th 18
AIM:NAR PE PEG Gauge Jan 29th 18
The tech hardware industry is trading at a PE ratio of 23x, in-line with the UK stock market PE of 18.5x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a lower 10.49% compared to the market’s 12.78%, potentially indicative of past headwinds. Since Northamber’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Northamber’s value is to assume the stock should be relatively in-line with its industry.

Next Steps:

Northamber has been an tech industry laggard in the past year. If Northamber has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although it 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. However, before you make a decision on the stock, I suggest you look at Northamber’s fundamentals in order to build a holistic investment thesis.