Are You Backing The Right Horse With Helios Technologies (NASDAQ:SNHY)?
Helios Technologies (NASDAQ:SNHY), a US$1.59b small-cap, is a machinery manufacturing company operating in an industry, which faces increasing demand of capital equipment and machinery from developing economies in Asia, Latin America and the Middle East. Capital goods analysts are forecasting for the entire industry, a strong double-digit growth of 24.0% in the upcoming year , and a whopping growth of 39.5% over the next couple of years. the growth rate of the US stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether Helios Technologies is lagging or leading in the industry.
See our latest analysis for Helios Technologies
What’s the catalyst for Helios Technologies’s sector growth?
Machinery manufacturers face the challenge of managing a plethora of new data so that it becomes useful, adapt technology to run their supply chains more efficiently. In the previous year, the industry saw growth in the twenties, beating the US market growth of 15.3%. Helios Technologies is neither a lagger nor a leader, and has been growing in-line with its industry peers at around 28.0% in the prior year. However, analysts are expecting the company to accelerate ahead of its peers over the next year, and deliver a 77.5% growth next year. This growth may make Helios Technologies a more expensive stock relative to its peers.
Is Helios Technologies and the sector relatively cheap?
The machinery sector’s PE is currently hovering around 22.18x, in-line with the US stock market PE of 19.86x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 12.6% on equities compared to the market’s 10.6%. On the stock-level, Helios Technologies is trading at a higher PE ratio of 44.38x, making it more expensive than the average machinery stock. In terms of returns, Helios Technologies generated 6.5% in the past year, which is 6.1% below the machinery sector.
Next Steps:
Helios Technologies’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this higher growth prospect is also reflected in the company’s price, suggested by its higher PE ratio relative to its peers. If Helios Technologies has been on your watchlist for a while, now may not be the best time to enter into the stock since it is trading at a higher valuation compared to other machinery companies. However, before you make a decision on the stock, I suggest you look at Helios 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 SNHY’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 Helios 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 editorial-team@simplywallst.com.
