ISDN Holdings Limited (SGX:I07), a S$80.9m small-cap, operates in the electrical equipment industry, which often track the broad economic cycle. During growth, businesses have excess cash, and are comfortable buying ancillary equipement. However, when economic conditions are challenging, businesses may try to repair equipment instead. Capital goods analysts are forecasting for the entire industry, a positive double-digit growth of 29.8% in the upcoming year , and a massive triple-digit earnings growth over the next couple of years. the growth rate of the Singapore stock market as a whole. Today, I’ll take you through the sector growth expectations, as well as evaluate whether ISDN Holdings is lagging or leading in the industry.
What’s the catalyst for ISDN Holdings’s sector growth?
Operating structures involve high fixed costs and fluctuating cost of raw materials, which impacts the companies’ earnings performance. Over the past year, the industry saw growth of 5.9%, though still underperforming the wider Singapore stock market. ISDN Holdings leads the pack with its impressive earnings growth of 78.3% over the past year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be 9.6% compared to the wider electrical equipment sector growth hovering in the twenties next year. As a future industry laggard in growth, ISDN Holdings may be a cheaper stock relative to its peers.
Is ISDN Holdings and the sector relatively cheap?
Electrical equipment products companies are typically trading at a PE of 15.87x, in-line with the Singapore stock market PE of 12.2x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 9.8% compared to the market’s 7.6%, potentially illustrative of past tailwinds. On the stock-level, ISDN Holdings is trading at a lower PE ratio of 5.43x, making it cheaper than the average electrical equipment stock. In terms of returns, ISDN Holdings generated 12.6% in the past year, which is 2.8% over the electrical equipment sector.
ISDN Holdings is electrical equipment industry laggard in terms of its future growth outlook. This is possibly reflected in the PE ratio, with the stock trading below its peers. If the stock has been on your watchlist for a while, now may be the time to dig deeper. Although the market is expecting lower growth for the company relative to its peers, ISDN Holdings is also trading at a discount, meaning that there could be some value from a potential mispricing. However, before you make a decision on the stock, I suggest you look at ISDN Holdings’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 I07’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 ISDN Holdings? 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.