Calix Inc (NYSE:CALX), is a US$343.93M small-cap, which operates in the tech hardware industry based in United States. The line between hardware and software companies has blurred, with many businesses shifting from pure-hardware to software-defined hardware and from products to services and solutions. As enterprises in various industry sector look to technology to enable their own transformations, the opportunities for technology companies have widened extensively. Tech analysts are forecasting for the entire hardware tech industry, a strong double-digit growth of 11.91% in the upcoming year , and an enormous growth of 53.70% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. Is now the right time to pick up some shares in tech companies? In this article, I’ll take you through the tech sector growth expectations, and also determine whether Calix is a laggard or leader relative to its tech sector peers. View our latest analysis for Calix
What’s the catalyst for Calix’s sector growth?
Despite all the opportunities, tech companies still face a host of challenges, including coping with an increasingly burdensome global regulation. Since the regulatory environment is unlikely to become less complex, organizations will need to address the constantly evolving rules for governing privacy, security and handling of data, as well as cybersecurity issues. In the previous year, the industry saw growth in the thirties, beating the US market growth of 13.44%. Calix 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 tech hardware peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 77.05% in the upcoming year. This future growth may make Calix a more expensive stock relative to its peers.
Is Calix and the sector relatively cheap?
The tech hardware industry is trading at a PE ratio of 28.62x, above the broader US stock market PE of 18.25x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a lower 8.17% compared to the market’s 11.12%, which may be indicative of past headwinds. Since Calix’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Calix’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:Calix’s industry-beating future is a positive for investors. If Calix 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 tech industry. However, before you make a decision on the stock, I suggest you look at Calix’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 CALX’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 Calix? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!