PCMI PCM, INC
Sector financial performance:
This company, which primarily markets technology solutions, including hardware, software, and service, directly to customers including companies, government, and education institutes, has been grouped into technology solution marketer sector in information processing equipment industry.
It seems that the demand for technology products and service and industrial products and service provided by companies in this sector has been strong and growing fast in the past two years thanks to strong demand from for profit business customers in North America and Europe. However, the demand from public sector customers has been seen declining in US market.
Shift of sales/mix to higher products and service and leverage of fast increased revenue improved companies’ margin. The typical gross margin is about 15% and with a SG&A as percentage of sales of 14% the operating margin is about 1% in 2018. The typical enterprise price/EBI ratio is 46.
It seems that the demand for technology solution provided by of this company has been weak from its customers of public sector, which presents continuingly decrease of about 16-20% annually. Demand from commercial customers seems to be picking up in 2018 after struggling 2017. Revenue from service/solution seems to strong and attribute significant portion of increase in profit.
The first three months of fiscal 2018 compared with the same period of 2017 (ended March 31 2018)
Organic revenue was basically flat attributable to increase of 2% in commercial sector offset by decrease of 16% in public sector.
Fiscal 2017 compared with fiscal 2016
Organic revenue decreased 3% attributable to decrease of 21% in public sector and decrease of 3% in commercial sector.
Fiscal 2016 compared with fiscal 2015
Organic revenue was flat.
Its gross margin went up from about 13.5% to 15% in 2018 due to shifting of sales mix to solutions. With the slightly improved SG&A as percentage of sales (down to 14%), we see an improvement in its operating margin (up to about 1% in 2018). Its average EBI/share increased significantly in 2018.
This company is having an enterprise price/EBI ratio of 47 (trailing 12 months) and enterprise/EBI ratio of 38(forward for fiscal 2018 based on growth of earning in first quarter of 2018). We think that its stock is being relatively slightly overvalued compared with its uncertainty in growth in revenue.
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