The Undervalued PC Connection Offers An Entry Point

PC Connection (NASDAQ:CNXN), the IT solutions company, has been generating a sustainable growth over the last few years. In addition, the company also offers special dividends to investors, representing its cash generating potential and the confidence in future fundamentals. However, investors are underestimating its growth potential, resulting in lower than expected growth in the share price.

Source: finviz.com

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The company’s share price declined more than 6% in the last twelve months, increasing only 13% in the last three years. On the other hand, the company continues generating solid growth in its revenue and earnings.

Therefore, PC Connection stock is trading at discount compared to the industry average. Its stock is trading only 15 times to earnings and 1.3 times to book ratio, when the industry is hovering in the range of 18 and 1.5 times, respectively.

After strong financial numbers for the third quarter, PC Connection has announced a special dividend of $0.34 per share. In Q3, the company generated record sales of $750 million, a growth of 11% over the prior year period. Its diluted earnings per share also increased more than 8% to $0.52 per share over the past year quarter.

All three of its business segments generated better than expected results. Sales from Business Solutions, Enterprise Solutions, and Public Sector Solutions increased at a double-digit rate compared to the previous year quarter.

The CEO stated, “The Company achieved strong growth in software, networking communications, and services. We believe our team and the strategies we have in place position Connection well to gain market share and increase shareholder value.”

The company’s strategy of concentrating on advancing its product portfolio by investing in high growth areas is working considering the recent financial numbers. Its software business is strengthening at a solid rate, thanks to strong prospects for virtualization, cloud, and security assessments.

Moreover, PC Connection expects encouraging growth from manufacturing, finance, and retail markets. Overall, the company looks well set to generate a sustainable growth in its sales and earnings in the following quarters.

Featured Image: Depositphotos/© violetkaipa

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