ShiftPixy Inc (NASDAQ:PIXY), a US$72.87M small-cap, is a professional services company operating in an industry, whose performance is linked to business conditions and the general economy, as it draws revenue from industries across different sectors. The sector also relies on the performance of general construction industries, financial and business service industries, and the mining sector as these generate a large proportion of the sector’s revenue. Professional services analysts are forecasting for the entire industry, a positive double-digit growth of 10.84% in the upcoming year , and an enormous growth of 32.23% over the next couple of years. However this rate still came in below the growth rate of the US stock market as a whole. Is the professional servicess industry an attractive sector-play right now? Below, I will examine the sector growth prospects, as well as evaluate whether ShiftPixy is lagging or leading its competitors in the industry. See our latest analysis for ShiftPixy
What’s the catalyst for ShiftPixy’s sector growth?
Business conditions are changing quickly for the service industry, with increased market competition primarily from new entrants entering into the space. Since revenues are generated primarily from project-work with clients from external companies, the lumpiness of revenues is driven by the activities of other sectors. Over the past year, the industry saw growth in the teens, beating the US market growth of 13.51%. ShiftPixy lags the pack with its earnings falling by more than half over the past year, which indicates the company will be growing at a slower pace than its professional services peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 29.60% in the upcoming year. This future growth may make ShiftPixy a more expensive stock relative to its peers.
Is ShiftPixy and the sector relatively cheap?
The professional services sector’s PE is currently hovering around 22.79x, in-line with the US stock market PE of 18.32x. 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 higher 16.79% compared to the market’s 11.18%, potentially illustrative of past tailwinds. Since ShiftPixy’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge ShiftPixy’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:ShiftPixy’s industry-beating future is a positive for investors. If ShiftPixy has been on your watchlist for a while, now may be the time to enter into the stock, if you like its growth prospects and are not highly concentrated in the professional services industry. However, before you make a decision on the stock, I suggest you look at ShiftPixy’s fundamentals in order to build a holistic investment thesis.
- 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.
- Historical Track Record: What has PIXY’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.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of ShiftPixy? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!