Hortonworks Inc (NASDAQ:HDP), is a US$1.33B 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 16.40% in the upcoming year , and an enormous 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. Today, I will analyse the industry outlook, as well as evaluate whether Hortonworks is lagging or leading in the industry. Check out our latest analysis for Hortonworks
What’s the catalyst for Hortonworks’s sector growth?
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 9.88%. Hortonworks leads the pack with its impressive earnings growth of 26.84% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Hortonworks poised to deliver a 22.49% growth over the next couple of years compared to the industry’s 16.40%.
Is Hortonworks and the sector relatively cheap?
The software tech industry is trading at a PE ratio of 29.26x, above the broader US stock market PE of 19.15x. 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 10.46%. Since Hortonworks’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Hortonworks’s value is to assume the stock should be relatively in-line with its industry.
Hortonworks’s industry-beating future is a positive for investors. If Hortonworks 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. However, before you make a decision on the stock, I suggest you look at Hortonworks’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 HDP’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 Hortonworks? 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.