PC Connection (NASDAQ: PCCC), Catalysts to move Higher this Year

PC Connection (NASDAQ: PCCC), Catalysts to move Higher this Year

PC Connection (NASDAQ: PCCC), Catalysts to move Higher this Year

PC Connection (NASDAQ: PCCC), Catalysts to move Higher this Year

It seems that the experts have constantly touted the irrelevance of the personal computer industry for the future. Smartphones and tablets have become the norm in the business. In fact, shares of PC giants such as Intel (NASDAQ: INTC), Hewlett-Packard (NYSE: HPQ) and Dell (NASDAQ: DELL) are trading at low multi-year valuations. While the near-term sales growth of PC makers will be lower, there is a big probability that they will recover as they quickly adapt to the ever-changing consumer needs.  Looking back, it is amazing how Big Blue International Business Machines (NYSE: IBM) has managed to stay in the game despite the constant changes of the industry. 

Over the past few years, the market has been selling these stocks indiscriminately giving astute investors opportunity to buy into good names. PC Connection (NASDAQ: PCCC) is one good business that the market has written off. This $327 million company is a direct marketer of various information technology solutions. It helps companies design, enable, manage and service their information technology environment. Its products include computer systems, software and peripheral environment.

It recently reported its full year results. Net sales for the year reached $2.2 billion, an increase of 2.6% compared to the same period last year. During the year, there were mixed results among its product segments. Both notebook and software sales increased while desktop and server sales registered a decline.

Net income amounted to $33.1 million, or $1.24 per share. This is higher than the previous year’s $28.8 million, or $1.07 per share. Excluding special charges related to retirement and severance payments, pro-forma net income would have been at $33.8 million, or an increase of 18.7% from the prior year. This is higher than its 5-year average earnings growth rate of 14.94%.

Analysts expect the company to post $1.29 earnings per share this year, an increase of 1.60% from the previous year. However, the company is projected to post earnings growth of 25% over the next 5 years. More importantly, the company has significantly cash reserve of $39.9 million, compared to the previous year’s $4.6 million. This gives investors assurance that the company can withstand stressed environments. It will also give them financial flexibility to pursue value-accretive growth expansions.

At present, the stock is trading at inexpensive levels at 10.38 times earnings. For the last 5 years, its stock has traded between 10.32 times and 13.34 times. The market is still not convinced that PC Connection has strong prospects in the future despite better than expected earnings growth and special dividend payment. Moving forward, management sees better top-line growth and overall profitability. This should be one of the catalysts for the stock to move higher this year. 

Comments

Related News

9 Responses

Leave a Reply
  1. Lillie
    Feb 06, 2013 - 08:45 AM

    Nice pick and interesting article with valid points on PC stocks. I don’t believe the PC is dead or dying. There are certain segments of the business that are growing and one of those is in the business sector.

    Reply
  2. Meiko Acebo
    meikoacebo
    Feb 14, 2013 - 10:50 AM

    Yes, but companies that have hard time adapting will definitely be crushed. PC is a good stock to look at. Market should be valuing this more.

    Reply
  3. Lillie
    Feb 14, 2013 - 10:54 AM

    It is about adapting, change and DIVERSIFICATION. Never put all of your eggs in one basket. Ultimately, it never works out.

    Reply
    • sarah
      Feb 15, 2013 - 11:38 PM

      Wow Lillie, you have a good knowledge of the business sis…
      That’s great

      Reply
    • entresean
      Feb 16, 2013 - 08:44 AM

      Spot on Lillie. Those three points make the difference between stocks that thrive and mediocre stocks. I have a feeling that PC Connection’s income will grow significantly this year. But, I still have my reservations. I’ll wait to see what it’s first quarter looks like.

      Reply
  4. Meiko Acebo
    meikoacebo
    Feb 14, 2013 - 12:26 PM

    Hi Lillie. You’re right. You pick stocks that allows you to sleep well at night.

    Reply
  5. Tyokunbo Abiola
    Tyokunbo
    Feb 16, 2013 - 08:48 AM

    I do believe personal computers will die in the end. The challenge before PC Connection is to develop new products before then.

    Reply
    • entresean
      Feb 16, 2013 - 09:02 AM

      You’re kidding. Ain’t you? You’re really one of those who believe that personal computers will die. That’s, in my opinion , delusional. A little bit of tweaking is all that’s needed in the PC world and PC will be on top again. Technology will surely return to its root.

      Reply
  6. Tyokunbo Abiola
    Tyokunbo
    Feb 16, 2013 - 09:18 AM

    I do hope so.I’m very comfortable with the personal computer. But I always worry about its ultimate survival.

    Reply

Leave a Reply

Connect with:

Your email address will not be published. Required fields are marked *