Rubicon Technology Inc (NASDAQ:RBCN), is a USD$21.64M small-cap, which operates in the tech hardware industry based in United States. Innovations such as augmented reality, machine learning and autonomous vehicles are paving the way for tech sector growth. Tech analysts are forecasting for the entire hardware tech industry, a strong double-digit growth of 16.29% in the upcoming year , and an enormous growth of 44.22% over the next couple of years. However this rate still came in below the growth rate of the US stock market as a whole. Today, I will analyse the industry outlook, as well as evaluate whether RBCN is lagging or leading in the industry. Check out our latest analysis for Rubicon Technology
What’s the catalyst for RBCN’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. Over the past year, the industry saw growth in the thirties, beating the US market growth of 10.30%. RBCN lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means RBCN may be trading cheaper than its peers.
Is RBCN and the sector relatively cheap?
Tech hardware companies are typically trading at a PE of 25x, relatively similar to the rest of the US stock market PE of 22x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 12.91% compared to the market’s 10.06%, potentially illustrative of past tailwinds. Since RBCN’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge RBCN’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? RBCN has been a tech industry laggard in the past year. If your initial investment thesis is around the growth prospects of RBCN, there are other tech companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how RBCN fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If RBCN has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its tech peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at RBCN’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Rubicon 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 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.