Bitauto Holdings Limited (NYSE:BITA), is a US$1.58B small-cap, which operates in the software industry based in China. The past two decades have experienced unprecedented changes in technology, and the next decade looks equally drastic. Tech analysts are forecasting for the entire software tech industry, a positive double-digit growth of 14.52% in the upcoming year , and a whopping growth of 79.67% 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’ll take you through the tech sector growth expectations, and also determine whether Bitauto Holdings is a laggard or leader relative to its tech sector peers. Check out our latest analysis for Bitauto Holdings
What’s the catalyst for Bitauto Holdings’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 twenties, beating the US market growth of 13.55%. Bitauto Holdings 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 73.77% in the upcoming year.
Is Bitauto Holdings and the sector relatively cheap?
The software tech industry is trading at a PE ratio of 31.57x, higher than the rest of the US stock market PE of 18.34x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a similar 12.85% on equities compared to the market’s 11.18%. Since Bitauto Holdings’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Bitauto Holdings’s value is to assume the stock should be relatively in-line with its industry.
Bitauto Holdings’s industry-beating future is a positive for investors. If Bitauto Holdings 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 Bitauto Holdings’s fundamentals in order to build a holistic investment thesis.
- 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.
- Historical Track Record: What has BITA’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.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Bitauto Holdings? 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.