Pyne Gould Corporation Limited (NZSE:PGC), a NZ$58.09M small-cap, is a capital market firm operating in an industry, which has recently been facing serious existential threats resulting from potential disintermediation and disruption from new technology. Many banks and capital markets firms, particularly the large, complex institutions, have been simplifying their business and operating models over the last few years, both for economic reasons and to reduce organizational complexity. Financial services analysts are forecasting for the entire industry, a fairly unexciting growth rate of 7.02% in the upcoming year . Is now the right time to pick up some shares in capital markets companies? Today, I will analyse the industry outlook, as well as evaluate whether Pyne Gould is lagging or leading its competitors in the industry. Check out our latest analysis for Pyne Gould
What’s the catalyst for Pyne Gould’s sector growth?
The threat of disintermediation in the capital markets industry is both real and imminent, taking profits away from traditional incumbent financial institutions. Over the past year, the industry saw growth in the teens, beating the NZ market growth of 5.70%. Pyne Gould 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 Pyne Gould may be trading cheaper than its peers.
Is Pyne Gould and the sector relatively cheap?
The capital markets sector’s PE is currently hovering around 20.3x, higher than the rest of the NZ stock market PE of 14.1x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry returned a lower 9.65% compared to the market’s 12.48%, which may be indicative of past headwinds. Since Pyne Gould’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Pyne Gould’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:Pyne Gould has been a capital markets industry laggard in the past year. If Pyne Gould 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 financial 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 Pyne Gould’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 PGC’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 Pyne Gould? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!