NQ Mobile Inc (NQ): Is Now The Time To Bet On Tech?
NQ Mobile Inc (NYSE:NQ), is a USD$452.79M small-cap, which operates in the software industry based in China. Whether it’s the next big thing in tech or an alliance with a partner in another industry, tech companies have plenty of opportunities for their companies to thrive. Tech analysts are forecasting for the entire software tech industry, a positive double-digit growth of 13.84% in the upcoming year , and a whopping growth of 55.17% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. Today, I’ll take you through the tech sector growth expectations, as well as evaluate whether NQ is lagging or leading in the industry. Check out our latest analysis for NQ Mobile
What’s the catalyst for NQ’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 teens, beating the US market growth of 10.30%. NQ 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 NQ may be trading cheaper than its peers.
Is NQ and the sector relatively cheap?
Software tech companies are typically trading at a PE of 43x, above the broader US stock market PE of 22x. This illustrates a somewhat overpriced sector compared to the rest of the market. However, the industry did return a higher 12.86% compared to the market’s 10.06%, which may be indicative of past tailwinds. Since NQ’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge NQ’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? NQ has been a tech industry laggard in the past year. If your initial investment thesis is around the growth prospects of NQ, there are other tech companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how NQ fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If NQ 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 NQ’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into NQ Mobile’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.
