Finzsoft Solutions Limited (NZSE:FIN), is a NZ$22.46M small-cap, which operates in the software industry based in New Zealand. 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, a positive double-digit growth of 12.28% in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the NZ stock market as a whole. 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 Finzsoft Solutions is a laggard or leader relative to its tech sector peers. See our latest analysis for Finzsoft Solutions
What’s the catalyst for Finzsoft Solutions’s sector growth?
US-based mega-competitors have been, and continue to be, the key drivers of industry growth. Many tech companies are repositioning themselves by focusing on high-growth areas such as IBM’s artificial intelligence play in Watson and Adobe’s shift to marketing its product for cloud computing. Over the past year, the industry saw growth of over 100%, beating the NZ market growth of 5.70%. Finzsoft Solutions leads the pack with its impressive earnings growth of over 100% last year. This proven growth may make Finzsoft Solutions a more expensive stock relative to its peers.
Is Finzsoft Solutions and the sector relatively cheap?
The software tech industry is trading at a PE ratio of 30.6x, above the broader NZ stock market PE of 14.1x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a similar 12.99% on equities compared to the market’s 12.48%. On the stock-level, Finzsoft Solutions is trading at a lower PE ratio of 9x, making it cheaper than the average tech stock. In terms of returns, Finzsoft Solutions generated 41.70% in the past year, which is 28.70% over the tech sector.
Next Steps:Finzsoft Solutions recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. In addition to this, its PE is below its tech peers, suggesting it is also trading at a relatively cheaper price. If Finzsoft Solutions has been on your watchlist for a while, now may be the best time to enter into the stock. Its industry-beating growth delivered may not have been fully accounted for in its shares given its lower PE ratio relative to its peers. However, before you make a decision on the stock, I suggest you look at Finzsoft Solutions’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 FIN’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 Finzsoft Solutions? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!