Remote Work Adds to ePlus

07/31/2020 5:00 am EST

Focus: TECHNOLOGY

Douglas Gerlach

President, ICLUBcentral, Inc.

ePlus Inc. (PLUS) is an information technology (IT) solutions provider operating from 35 locations serving U.S., Europe, and Asia-Pacific markets, observes Douglas Gerlach, editor of SmallCap Informer — and a participant in the upcoming MoneyShow virtual event, August 3-5. Register for free here.

Customers include commercial firms, state and local governments, government contractors, and educational institutions. ePlus operates in two operating segments, technology and financing.

The Technology segment offers hardware, software, maintenance, and services dealing with security, project management, and user support, and made up 96% of FY 2019 revenues. The financing segment specializes in leasing and financing arrangements for IT equipment and assets.

ePlus was able to quickly pivot its solution set to fulfill customer needs for remote workforce enablement and related security, and the company has already been working on building specific solutions for the new hybrid at  work and remote-workforce model.

 ePlus’s strategic and technology partners include many of the largest names in tech. The company notes that it is not involved in many companies in the retail, hospitality, and airline industries. 

We believe ePlus has a good chance of weathering the COVID-19 pandemic better than most companies, and see opportunities for growth in the “new normal” world to follow. We are targeting modest 8% annual growth in revenues and non-GAAP EPS for ePlus in the next five years.

Combined with some expansion of its P/E ratio, this is enough to generate an acceptable rate of return with some additional potential upside. Our estimated future high price is $168, based on a high P/E of 18.7 and non-GAAP EPS of $9.01.

Our downside price estimate is $59, which reflects a theoretical 20% decline from current levels. From the recent price of $73.75, ePlus could return 18.0% annually through the next five years. The reward/risk ratio stands at 6.4-to-1.

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