ISDN Holdings Limited (SGX:I07), a S$74.48M 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 13.59% in the upcoming year , and a strong near-term growth of 26.39% over the next couple of years. This rate is more than double the growth rate of the Singapore stock market as a whole. Today, I will analyse the industry outlook, and also determine whether ISDN Holdings is a laggard or leader relative to its capital goods peers. Check out our latest analysis for ISDN Holdings
What’s the catalyst for ISDN Holdings’s sector growth?
The electrical equipment industry is relatively fragmented, with an exception of few dominant players with a large portion of sales. Operating structures involve high fixed costs, as well as fluctuating cost of raw materials used in manufacture of products, which impacts the companies’ earnings performance. In the previous year, the industry endured negative growth of -7.87%, underperforming the Singapore market growth of 10.48%. ISDN Holdings leads the pack with its impressive earnings growth of 67.01% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with ISDN Holdings poised to deliver a 36.01% growth over the next couple of years compared to the industry’s 13.59%.
Is ISDN Holdings and the sector relatively cheap?
The electrical equipment products industry is trading at a PE ratio of 18.51x, relatively similar to the rest of the Singapore stock market PE of 13.9x. 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 10.19% compared to the market’s 7.30%, potentially illustrative of past tailwinds. On the stock-level, ISDN Holdings is trading at a lower PE ratio of 8.66x, making it cheaper than the average electrical equipment stock. In terms of returns, ISDN Holdings generated 9.05% in the past year, which is 1.14% below the electrical equipment sector.
ISDN Holdings’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. In addition to this, its PE is below its electrical equipment peers, suggesting it is also trading at a relatively cheaper price. Perhaps the market hasn’t fully accounted for the growth, meaning now may be the right time to accumulate more of, or enter into, the stock. 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 pass 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.