Can CPS Technologies Corporation (CPSH) Compete With Tech Giant Peers?
CPS Technologies Corporation (NASDAQ:CPSH), is a USD$18.09M small-cap, which operates in the tech hardware industry based in United States. The past two decades have experienced unprecedented changes in technology, and the next decade looks equally drastic. Tech analysts are forecasting for the entire hardware tech industry, a positive double-digit growth of 15.62% in the upcoming year , and an enormous growth of 52.89% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether CPSH is lagging or leading in the industry. View our latest analysis for CPS Technologies
What’s the catalyst for CPSH’s sector growth?
US-based mega-competitors, such as Alphabet, Apple and Facebook, have been and appears to continue to be, the key drivers of industry growth. Many tech companies are repositioning themselves by focusing on high-growth areas such as IBM’s artificial intelligence play in Watson and Adobe’s shift to marketing its product for cloud computing. In the past year, the industry delivered growth in the twenties, beating the US market growth of 10.30%. CPSH 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. As the company trails the rest of the industry in terms of growth, CPSH may also be a cheaper stock relative to its peers.
Is CPSH and the sector relatively cheap?
The tech hardware industry is trading at a PE ratio of 26x, in-line with the US stock market PE of 22x. 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 10.55% on equities compared to the market’s 10.06%. Since CPSH’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge CPSH’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? CPSH has been a tech industry laggard in the past year. If your initial investment thesis is around the growth prospects of CPSH, there are other tech companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how CPSH fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If CPSH has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has 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. Before you make a decision on the stock, I suggest you look at CPSH’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into CPS Technologies’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other tech stocks instead? Use our free playform to see my list of over 1000 other tech companies trading on the market.
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.
