PEC Solutions (PECS) IPO this week. This looks like it may potentially be a high quality overlooked IPO:
pec.com
hoovers.com
Subject 33089
Here's my amateur analysis of this:
Positives:
- Well established, profitable company. This isn't something that has been thrown together so they can have an IPO.
- Fairly unique in its sector: E-enabling government. Only other publically traded company with this sole focus that I've found is EGOV, and that seems to be a less well established company without the excellent clients and track record of PECS.
- Excellent press release history. Last year they issued news on new contracts each month or so (see the website).
- From their website, you can see that they are hiring a lot of staff and have recently moved into a new hi-tech campus site.
- Hasn't been mentioned in any of the IPO previews I've seen.
- Steady (but not dramatic) revenue growth.
- Management is solid wall of dark blue suits with lots of experience and background in Federal/govt systems work:
pec.com
Negatives:
- As a consulting company, profit margins tend to be low, because this work is labor intensive and performed on a contract by contract basis. Some investors don't like these companies and prefer product-oriented businesses. For example, I think this is the perception that keeps high quality, profitable consulting companies like WFII from getting wider attention.
- The nature of the business seems to be steady development and growth, so you probably won't see the sort of new announcements that cause sensational increases in stock price. (Hang on, this should be in the Positives column).
- If this is viewed as 'just another Internet consulting company' this may be incorrectly lumped together with recent IPOs ACOM, OGNC, IIXL, VIAN which have had rough runs (ACOM and OGNC were shamelessly hyped up and have been, as is usually the case in such situations, absolutely awful for aftermarket investors). There is an oversupply of new stocks in the web consulting sector, and it has been hard to differentiate between those companies.
- PEC Solutions is focussed on providing tech consulting and services to the tech-hungry government, especially Federal govt. This may be perceived as being rather uninteresting by some people, or as a sector that may be affected if the administration changes and becomes less friendly to govt. spending.
Valution:
My _completely amateur ballpark_ take on this is that it could be a $1.5 billion company. There are 25 million shares altogether, which would value these shares at $60 per share (1,500,000,000 divided by 25,000,000). The offering price, which may be increased before they go public, is $12-14. So if I can buy this in the aftermarket under $25, it may be a good deal. No idea which way the chart will go after the IPO, especially in this shakey market for tech. I was rather too eager buying Tele1Europe (TEUR) (which I still hold strongly, and which I averaged down on during the dip last week). Perhaps I'll learn from that and watch how PECS does before deciding what to do. |
