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ChinaCache International Holdings Ltd (NASDAQ:CCIH) And The Tech Sector Outlook 2018

Alexis Guardo

ChinaCache International Holdings Ltd (NASDAQ:CCIH), is a $51.68M small-cap, which operates in the software industry based in China. Innovations such as augmented reality, machine learning and autonomous vehicles are paving the way for tech sector growth. Tech analysts are forecasting for the entire software tech industry, a strong double-digit growth of 16.40% in the upcoming year , and a whopping growth of 34.25% over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the US stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether ChinaCache International Holdings is a laggard or leader relative to its tech sector peers. View our latest analysis for ChinaCache International Holdings

What’s the catalyst for ChinaCache International Holdings’s sector growth?

NasdaqGS:CCIH Past Future Earnings Jan 30th 18

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 in the teens, beating the US market growth of 10.47%. ChinaCache International Holdings lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means ChinaCache International Holdings may be trading cheaper than its peers.

Is ChinaCache International Holdings and the sector relatively cheap?

NasdaqGS:CCIH PE PEG Gauge Jan 30th 18

Software tech companies are typically trading at a PE of 29.3x, above the broader US stock market PE of 20.1x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a similar 10.32% on equities compared to the market’s 10.43%. Since ChinaCache International Holdings’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge ChinaCache International Holdings’s value is to assume the stock should be relatively in-line with its industry.

Next Steps:

ChinaCache International Holdings has been an tech industry laggard in the past year. If ChinaCache International Holdings has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although it delivered lower growth relative to 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 ChinaCache International Holdings’s fundamentals in order to build a holistic investment thesis.

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.