ITUS Corporation ( NASDAQ:ITUS ), is a $100.49M small-cap, which operates in the tech hardware industry based in United States. As various enterprises look to technology to enable their own transformations, the opportunities for technology companies have widened extensively. Tech analysts are forecasting for the entire hardware tech industry, a strong double-digit growth of 19.14% in the upcoming year , and a robust short-term growth of 26.67% 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'll take you through the tech sector growth expectations, and also determine whether ITUS is a laggard or leader relative to its tech sector peers. See our latest analysis for ITUS
What's the catalyst for ITUS's sector growth?
US-based mega-competitors have been, and continue to be, the key drivers of industry growth. Many tech companies are repositioning themselves by focusing on high-growth areas such as IBM's artificial intelligence play in Watson and Adobe's shift to marketing its product for cloud computing. Over the past year, the industry saw growth in the teens, beating the US market growth of 10.46%. ITUS 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 ITUS may be trading cheaper than its peers.
Is ITUS and the sector relatively cheap?
The tech hardware sector's PE is currently hovering around 20.4x, relatively similar to the rest of the US stock market PE of 20.1x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 8.77% on equities compared to the market's 10.42%. Since ITUS's earnings doesn't seem to reflect its true value, its PE ratio isn't very useful. A loose alternative to gauge ITUS's value is to assume the stock should be relatively in-line with its industry.
Next Steps:
ITUS has been an tech industry laggard in the past year. If ITUS has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although it 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. However, before you make a decision on the stock, I suggest you look at ITUS's fundamentals in order to build a holistic investment thesis.
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1. 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.
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2. Historical Track Record: What has ITUS'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.
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3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ITUS? 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 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.
