Sky Solar Holdings Ltd (NASDAQ:SKYS), a USD$81.81M small-cap, operates in the utilities industry which faces recent trends of rising cybersecurity threats, increasing usage by consumers and growing number of innovative competitors. Utilities analysts are forecasting for the entire industry, an extremely elevated growth of 34.06% in the upcoming year , and a single-digit 2.35% growth over the next couple of years. However, this rate is still 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 Sky Solar Holdings is a laggard or leader relative to its utilities sector peers. View our latest analysis for Sky Solar Holdings
What’s the catalyst for Sky Solar Holdings’s sector growth?
Moving forward, key issues facing utility companies include climate change and environmental concerns, and new entrants and disruptive technology. Over the past year, the industry saw negative growth of -35.62%, underperforming the US market growth of 10.83%. Sky Solar Holdings lags the pack with its which indicates the company will be growing at a slower pace than its utilities peers.
Is Sky Solar Holdings and the sector relatively cheap?
Utility companies are typically trading at a PE of 13x, lower than the rest of the US stock market PE of 20x. This illustrates a somewhat under-priced sector compared to the rest of the market. Though, the industry did returned a lower 5.82% compared to the market’s 10.47%, which may explain the lower relative valuation. On the stock-level, Sky Solar Holdings is trading at a lower PE ratio of 8x, making it cheaper than the average utility stock. In terms of returns, Sky Solar Holdings generated 8.01% in the past year, which is 2.18% over the utilities sector.
What this means for you:
Are you a shareholder? Sky Solar Holdings is an utilities industry laggard in terms of its future growth outlook. 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 Sky Solar Holdings 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 Sky Solar Holdings has been on your watchlist for a while, now may be the time to dig deeper into the stock. Although the market is expecting lower growth for the company relative to its peers, Sky Solar Holdings 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 Sky Solar Holdings’s other important fundamentals such as the company’s financial health in order to build a holistic investment thesis.
For a deeper dive into Sky Solar Holdings’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 utilities stocks instead? Use our free playform to see my list of over 300 other utilities 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.