Brightcove Inc (NASDAQ:BCOV), is a USD$244.16M small-cap, which operates in the software industry based in United States. As various enterprises look to technology to enable their own transformations, the opportunities for technology companies have widened extensively. Tech analysts are forecasting for the entire software tech industry, a relatively muted growth of 4.54% in the upcoming year . Below, I will examine the sector growth prospects, as well as evaluate whether Brightcove is lagging or leading in the industry. See our latest analysis for Brightcove
What’s the catalyst for Brightcove’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 previous year, the industry saw growth of 7.42%, though still underperforming the wider US stock market. Brightcove 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 software peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 37.79% in the upcoming year.
Is Brightcove and the sector relatively cheap?
Software tech companies are typically trading at a PE of 24x, relatively similar to the rest of the US stock market PE of 19x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 12.14% on equities compared to the market’s 10.46%. Since Brightcove’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Brightcove’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? Brightcove’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto Brightcove as part of your portfolio. However, if you’re relatively concentrated in tech, you may want to value Brightcove based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If Brightcove has been on your watchlist for a while, now may be the time to enter into the stock, if you like its growth prospects and are not highly concentrated in the tech industry. Before you make a decision on the stock, take a look at Brightcove’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into Brightcove’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.