MCsweet, regarding your ALPH, it doesn't look too bad. No debt and cash covers burn, at current rate, for several years. Enough to see company through to a turnaround maybe. I guess these consulting companies should be able to adjust their p/l and balance sheets fairly easily by quickly reducing non-productive assets - consultants who can't bill enough revenue because of lousy business conditions.
I have trouble evaluating consulting companies in general because the valuable assets are the consultants. I don't often do discounted cash flows, and with the consulting business, making assumptions about the future seems to involve risky assumptions about the types of expertise that will be in vogue in the future. For example, the demand for consultants and consulting companies regarding ISO registration or TQM or the self-directed work teams of the '80's and '90's seems to have evaporated (based on my limited reading and understanding); now maybe we are seeing sustained (?) diminished demand for internet developers, or internet advisors.
I am trying to come up with a metric to quickly screen for possible consulting companies that might be worth further investigating. What I am using for now is the criterion of a price/sales ratio of 1.5. Anything under, I'll consider looking closer. Over, and I'll want to see something special before I look further. I'm doing this by guess - I have no empirical evidence to back up my metric.
ALPH fits that metric.
One large cap that fits that I'm looking at is EDS. Their size means they can tackle the big jobs that the smaller players might not have regarding breadth, skills, and resources.
Anybody here have an another opinion to share regarding this subject or these stocks?
Paul Senior |
