Yahoo Finance Future Outlook Of The Tech Industry And Data#3 Limited (ASX:DTL)
Data#3 Limited (ASX:DTL), is a AU$226.3m small-cap, which operates in the IT services industry based in Australia. As various enterprises look to technology to enable their own transformations, the opportunities for technology companies have widened extensively. However, more specifically in the IT service industry, tech analysts are forecasting a positive double-digit growth of 27.6% in the upcoming year , and a massive growth of 68.2% over the next couple of years. This rate is larger than the growth rate of the Australian stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether Data#3 is a laggard or leader relative to its tech sector peers.
See our latest analysis for Data#3
What’s the catalyst for Data#3’s sector growth?
Many technologies are now coming into their own as their power and speed increase and the cost of delivering them goes down. Over the past year, the industry saw growth in the thirties, beating the Australian market growth of 11.3%. Data#3 lags the pack with its negative growth rate of -8.4% over the past year, which indicates the company has been growing at a slower pace than its IT services peers. Although Data#3 is poised to deliver a 12.9% growth next year, moving it from negative to positive territory, it still lags its industry average rate of growth of 27.6%.
Is Data#3 and the sector relatively cheap?
The IT services sector’s PE is currently hovering around 20.65x, relatively similar to the rest of the Australian stock market PE of 16.51x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a higher 14.3% compared to the market’s 11.9%, potentially illustrative of past tailwinds. On the stock-level, Data#3 is trading at a PE ratio of 16.19x, which is relatively in-line with the average IT services stock. In terms of returns, Data#3 generated 31.2% in the past year, which is 16.8% over the IT services sector.
Next Steps:
If Data#3 has been on your watchlist for a while, now may not be the best time to enter into the stock. The company is an tech industry laggard in terms of its future growth outlook, and is trading relatively in-line with its peers. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the tech sector. However, before you make a decision on the stock, I suggest you look at Data#3’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 DTL’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 Data#3? 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
