Yahoo Finance Are You Backing The Right Horse With Exco Technologies Limited (TSE:XTC)?
Exco Technologies Limited (TSE:XTC), a CA$423.3m small-cap, operates in the machinery manufacturing industry, which faces increasing demand of capital equipment and machinery from developing economies in Asia, Latin America and the Middle East. Capital goods analysts are forecasting for the entire industry, an extremely robust growth of 39.7% in the upcoming year , and a massive growth of 51.3% over the next couple of years. the growth rate of the Canadian stock market as a whole. Below, I will examine the sector growth prospects, as well as evaluate whether Exco Technologies is lagging or leading in the industry.
See our latest analysis for Exco Technologies
What’s the catalyst for Exco Technologies’s sector growth?
Machinery manufacturers face the challenge of managing a plethora of new data so that it becomes useful, adapt technology to run their supply chains more efficiently. In the past year, the industry delivered growth in the twenties, beating the Canadian market growth of 15.0%. Exco Technologies lags the pack with its negative growth rate of -16.1% over the past year, which indicates the company has been growing at a slower pace than its machinery peers. Although Exco Technologies is poised to deliver a 24.2% growth next year, moving it from negative to positive territory, it still lags its industry average rate of growth of 39.7%.
Is Exco Technologies and the sector relatively cheap?
The machinery sector’s PE is currently hovering around 24.14x, above the broader Canadian stock market PE of 15.53x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a similar 11.0% on equities compared to the market’s 10.5%. On the stock-level, Exco Technologies is trading at a lower PE ratio of 11.05x, making it cheaper than the average machinery stock. In terms of returns, Exco Technologies generated 11.6% in the past year, in-line with its industry average.
Next Steps:
Exco Technologies is machinery 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 the stock has been on your watchlist for a while, now may be the time to dig deeper. Although the market is expecting lower growth for the company relative to its peers, Exco Technologies 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 Exco Technologies’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 XTC’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 Exco Technologies? 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.
