Over the past six months, ePlus has been a great trade, beating the S&P 500 by 5.1%. Its stock price has climbed to $92.23, representing a healthy 21.3% increase. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is it too late to buy PLUS? Find out in our full research report, it’s free.
Why Does ePlus Spark Debate?
Starting as a financing company in 1990 before evolving into a full-service technology provider, ePlus (NASDAQ: PLUS) provides comprehensive IT solutions, professional services, and financing options to help organizations optimize their technology infrastructure and supply chain processes.
Two Positive Attributes:
1. Long-Term Revenue Growth Shows Strong Momentum
A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, ePlus grew its sales at a solid 8.5% compounded annual growth rate. Its growth surpassed the average business services company and shows its offerings resonate with customers.
2. Increasing Free Cash Flow Margin Juices Financials
Free cash flow isn’t a prominently featured metric in company financials and earnings releases, but we think it’s telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, ePlus’s margin expanded by 6.3 percentage points over the last five years. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell. ePlus’s free cash flow margin for the trailing 12 months was 2.2%.
One Reason to Be Careful:
Recent EPS Growth Below Our Standards
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
ePlus’s unimpressive 6.5% annual EPS growth over the last two years aligns with its revenue trend. This tells us it maintained its per-share profitability as it expanded.
Final Judgment
ePlus’s positive characteristics outweigh the negatives, and with its shares outperforming the market lately, the stock trades at 16.5× forward P/E (or $92.23 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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