Determine Inc (NASDAQ:DTRM) And The Tech Sector Outlook 2018
Determine Inc (NASDAQ:DTRM), is a US$21.45M small-cap, which operates in the software industry based in United States. Technology has become a vital component of every industry, bringing unprecedented opportunities for growth, along with challenges and competition. Tech analysts are forecasting for the entire software tech industry, a positive double-digit growth of 12.93% in the upcoming year , and a whopping growth of 30.25% 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. Today, I will analyse the industry outlook, as well as evaluate whether Determine is lagging or leading in the industry. Check out our latest analysis for Determine
What’s the catalyst for Determine’s sector growth?
Despite all the opportunities, tech companies still face a host of challenges, including coping with an increasingly burdensome global regulation. Since the regulatory environment is unlikely to become less complex, organizations will need to address the constantly evolving rules for governing privacy, security and handling of data, as well as cybersecurity issues. In the past year, the industry delivered growth in the teens, beating the US market growth of 9.88%. Determine leads the pack with its impressive earnings growth of 41.42% over the past year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be 1.17% compared to the wider software sector growth hovering in the teens next year.
Is Determine and the sector relatively cheap?
Software tech companies are typically trading at a PE of 26.41x, higher than the rest of the US stock market PE of 18.99x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry returned a similar 10.24% on equities compared to the market’s 10.34%. Since Determine’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Determine’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:
Determine is an tech industry laggard in terms of its future growth outlook. If Determine has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth is expected to be lower than 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 Determine’s fundamentals in order to build a holistic investment thesis.
1. 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.
2. Historical Track Record: What has DTRM’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.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Determine? 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.
