Why PAX Global Technology Limited (HKG:327) Could Be Worth Watching

While PAX Global Technology Limited (HKG:327) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the SEHK over the last few months, increasing to HK$8.05 at one point, and dropping to the lows of HK$5.92. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether PAX Global Technology's current trading price of HK$6.43 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at PAX Global Technology’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for PAX Global Technology

Is PAX Global Technology Still Cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 5.47x is currently trading slightly below its industry peers’ ratio of 6.51x, which means if you buy PAX Global Technology today, you’d be paying a decent price for it. And if you believe that PAX Global Technology should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Furthermore, it seems like PAX Global Technology’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will PAX Global Technology generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. PAX Global Technology's earnings over the next few years are expected to increase by 39%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? 327’s optimistic future growth appears to have been factored into the current share price, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 327? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 327, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for 327, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. When we did our research, we found 2 warning signs for PAX Global Technology (1 is potentially serious!) that we believe deserve your full attention.

If you are no longer interested in PAX Global Technology, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.