Hebron Technology Co Ltd (NASDAQ:HEBT), a USD$34.83M small-cap, is a machinery manufacturing company operating in an industry, which faces increasing demand of capital equipment and machinery from developing economies in Asia, Latin America and the Middle East. Capital goods analysts are forecasting for the entire industry, a positive double-digit growth of 16.02% in the upcoming year , and an optimistic near-term growth of 21.26% over the next couple of years. This rate is more than double the growth rate of the US stock market as a whole. Today, I will analyse the industry outlook, and also determine whether Hebron Technology is a laggard or leader relative to its capital goods peers. View our latest analysis for Hebron Technology
What’s the catalyst for Hebron Technology’s sector growth?
Machinery manufacturers face the challenge of managing a plethora of new data so that it becomes useful, adapt technology to run their supply chains and operations more efficiently, and build strategic partnerships that will help grow market share. Over the past year, the industry saw growth in the teens, beating the US market growth of 10.87%. Hebron Technology lags the pack with its negative growth rate of -37.94% over the past year, which indicates the company will be growing at a slower pace than its machinery peers. As the company trails the rest of the industry in terms of growth, Hebron Technology may also be a cheaper stock relative to its peers.
Is Hebron Technology and the sector relatively cheap?
The machinery sector’s PE is currently hovering around 24x, in-line with the US stock market PE of 20x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 11.66% on equities compared to the market’s 10.43%. On the stock-level, Hebron Technology is trading at a lower PE ratio of 9x, making it cheaper than the average machinery stock. In terms of returns, Hebron Technology generated 13.85% in the past year, which is 2.19% over the machinery sector.
What this means for you:
Are you a shareholder? Hebron Technology has been a machinery industry laggard in the past year. This is possibly reflected in the PE ratio, with the stock trading below its peers. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto Hebron Technology as part of your portfolio, or maybe increase your holding. If you’re bearish on the stock, now may not be the best time to sell!
Are you a potential investor? If Hebron Technology has been on your watchlist for a while, now may be the time to dig deeper into the stock. Although the stock delivered lower growth relative to its peers, Hebron Technology is also trading at a discount, meaning that there could be some value from a potential mispricing. However, before you make a decision on the stock, I suggest you look at Hebron Technology’s other important fundamentals such as the company’s financial health in order to build a holistic investment thesis.
For a deeper dive into Hebron Technology’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 capital goods stocks instead? Use our free playform to see my list of over 100 other machinery 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.