A Market Gem in the rough? SYKE.. left it off my watch list yesterday unfortunately ..but this is still has potentials after its earnings report
This Article from Forbes November 2, 1998
SOME OF THE hottest stocks of the recent bull
market were of telemarketing firms like APAC
TeleServices, West TeleServices and Sitel Corp.
They employ hundreds of phone operators to
pester people at dinnertime on behalf of
companies like AT&T, UPS, J.C. Penney and GTE.
Their ipos created billions in stock market value
in 1995 and 1996, but in the last year most of
These stocks have fallen by more than 60%. It
seems many of them were too dependent on a few
large clients which are cutting costs.
One unintended victim of the carnage has been
$428 million (estimated 1998 revenues) Tampa,
Fla.-based Sykes Enterprises (NASDAQ:SYKE).
Unlike other telemarketing firms, Sykes doesn't
peddle goods and services but provides technical
support and help-desk services for Microsoft,
Gateway, Compaq and IBM. Most of its 7,400
employees work in 23 call centers around the
world. Sykes stock is down 45% in the last 12
months despite the fact that its tech support
business has been growing rapidly and is much
less susceptible to switching and price competition
than telemarketers.
Hel-loo?
An investment in folks who wont interrupt
your dinner
Indeed, according to Deutsche Bank analyst
James Marks, Sykes' top five customers account
for just 28% of its revenue, compared to well over
over 50% for many of the telemarketers.
The company is run by 62-year-old John Sykes, a
college dropout who studied to be a minister but
ended up writing technical manuals for engineers.
Since its April 1996 IPO, Sykes has met or
exceeded every earnings or revenue growth
target he has made. According to Marks, internal
earnings growth will grow at 25% per year and
revenues at a rate of more than 30%.
A key to Sykes' growth and
profitability—operating margins have grown from
2.9% to 10.5% since 1994—has been the way he
opens call centers. Sykes gets municipalities
like Ada, Okla. to put up the land, plus half of
5 $ million it costs to open a call center. In
Sykes breaks even on the centers in three months
and gets back all of its initial capital within
18 months.
At a current price of $14.25, Sykes is selling at
less than 13 times Marks' 1999 earnings estimate
of $1.15. Says Marks, whose target price is $35
within a year, "This is not a telemarketer; it's
a high-growth bargain." |
