I have recently shorted the stock big-time.
Having managed IT professional-service firms and having invested in many, this is the most over-priced situation I have ever seen. The stock is worth no more than 12-14 based on any fundamental analysis. Once the naive early investors realize that, despite Perot's name (which doesn't garner any business), this company has no differentiation versus other long-standing project-level firms. Indeed, PER is really only a second/third-tier player to the likes of Andersen, CSC, EDS, IBM,Oracle's professional-service group and Cap Gemini. It lacks the special methodologies and excitement of a Cambridge Technology, and its margins are thinner than its peers, because it is second/third-tier and usually can only win business on a low-bidder basis.
Finally, its business is far too concentrated with few clients leaving it exceptionally vulnerable to the loss of any one of them. Now that the company is public and all can see their largest clients, these clients will become competitors' targets.
No wonder, Bear Stearns couldn't even muster a "buy" recommendation at these price levels. |
