Corero Network Security (OTC:$CRREF) operates in the software industry based in the United States. There are a lot of directions tech companies can go in, such as getting involved with artificial intelligence and robotics, or partnering with another industry like healthcare or manufacturing. In the upcoming year, tech analysts are predicting the entire software tech industry is going to have a positive double-digit growth of 11.63%, with an even bigger growth of 61.40% forecasted over the next several years. So what does this mean for Corero? We will analyze the industry outlook on the whole, and evaluate whether Corero is lagging or leading in the competition.
Sector Growth
Business must adopt new cutting-edge technology, or risk losing any competitive advantages. Technologies are increasing in power and speed while lowering their deliverance costs. Growth strategies include new M&A, collaboration and alliances, cost reduction, and organic growth. Last year there was an industry growth of 9.34%; however, in this same time frame, Corero had a negative growth rate of -44.5%. This indicates that the company is growing at a slower rate than its software peers. Although, this does mean that Corero stock may be cheaper in comparison.
Is the Price Right?
Software tech companies usually trade at a PE of 28x, making the industry a somewhat overpriced sector compared to the rest of the market. At the same time, though, the tech industry returned a higher 16.18% compared to the market’s 12.78%. Corero’s earnings don’t really reflect the company’s true value, so its PE ratio isn’t very helpful in this case. Instead, we can gauge Corero’s value by assuming that the stock should be about in-line with its industry.
What’s it All Mean?
Corero has lagged behind the rest of the tech industry this past year. If you’re a shareholder whose initial investment thesis had to do with the growth prospects of Corero, then you may want to look at other tech companies that have delivered a higher growth and are maybe trading at a discount to the industry average. Before doing anything, figure out how Corero fits into your long-term plans, and what may be the opportunity cost of holding onto any stock.
If you are a potential investor who’s been watching Corero for a while now, you may want to consider digging into the stock. Despite its slower growth rate, the market may just be pessimistic about the stock, causing it to be undervalued. Again, though, before doing anything, look into Corero’s future cash flows and assess from there whether you think the stock is trading at a reasonable price.
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