Everspin Technologies Inc (NASDAQ:MRAM), is a US$120m small-cap, which operates in the tech hardware industry based in United States. In the past decade, the mega-tech companies, such as Amazon and Microsoft, have built highly successful and ubiquitous platforms and ecosystem in which smaller companies gravitate towards. Other hardware and software tech service firms, including many that dominated before 2000, are struggling to compete, and are going through significant restructuring in order to move away from their legacy systems. Tech analysts are forecasting for the entire hardware tech industry, a strong double-digit growth of 24% in the upcoming year , and an enormous growth of 68% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. Is the tech industry an attractive sector-play right now? Below, I will examine the sector growth prospects, as well as evaluate whether Everspin Technologies is lagging or leading its competitors in the industry.
What’s the catalyst for Everspin Technologies’s sector growth?
The battle for competitive advantage has led businesses to adopt new the cutting-edge technology, or risk being left behind. Many technologies are now coming into their own as their power and speed increase and the cost of delivering them goes down. And some are pursing growth through various strategies including new M&A, collaboration and alliances, as well as cost reduction and organic growth. Over the past year, the industry saw growth of 4.9%, though still underperforming the wider US stock market. Everspin Technologies lags the pack with its lower growth rate of 1.8% over the past year, which indicates the company has been growing at a slower pace than its tech hardware peers. Moreover, the trend of below-industry growth rate is expected to continue in the future with Everspin Technologies poised to deliver a 11% growth compared to the industry average growth rate of 24%. This growth is a median of profitable companies of 25 Semiconductor companies in US including Amtech Systems, JA Solar Holdings and O2Micro International. As an industry laggard, Everspin Technologies may be a cheaper stock relative to its peers.
Is Everspin Technologies and the sector relatively cheap?
Tech hardware companies are typically trading at a PE of 19.3x, relatively similar to the rest of the US stock market PE of 20.13x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 13% compared to the market’s 10%, potentially illustrative of past tailwinds. Since Everspin Technologies’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Everspin Technologies’s value is to assume the stock should be relatively in-line with its industry.
Everspin Technologies is an tech industry laggard in terms of its future growth outlook. If Everspin Technologies has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth is expected to be lower than 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 Everspin Technologies’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 MRAM’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 Everspin Technologies? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.