EPIQ Systems: Legally Speaking

10/19/2015 7:00 am EST


Taesik Yoon

Editor, Forbes Investor and Forbes Special Situation Survey

Our latest new recommendation is a provider of technology solutions for the legal profession that streamline the administration of bankruptcy, litigation, investigations, financial transactions, and regulatory compliance matters, explains Taesik Yoon, editor of Forbes Investor.

EPIQ Systems (EPIQ) also offers services such as legal notification, claims and project administration, call center management, Web site administration, and controlled disbursement.

Due to the complexity of legal matters, the volume of data, and the staggering amount of documents produced, law firms have become increasingly reliant on electronic evidence management systems. 

With its eDataMatrix software, EPIQ analyzes, filters, and produces documents and makes them available for efficient attorney review through a hosted environment.

It also assists creditors to streamline processing of their loan portfolios in bankruptcy cases, monitors developments in all US bankruptcy courts, and automatically classifies docket filings.

Management recently guided its full-year adjusted earnings per share outlook towards the lower end of its 90-96 cents projected range. 

That was enough to send its shares tumbling 24% over the past two months.
Yet even with the more cautious view for the second half that this implies, the guidance still indicates adjusted earnings growth of more than 40% over this period. 

While some stocks may be deserving of their recent market-related sell-offs, EPIQ should not be among them, in our view.

Indeed, even going by the low end of EPIQ’s guidance, adjusted earnings per share are anticipated to climb in excess of 40% in the final two quarters of fiscal 2015.

EPIQ has enjoyed strong order activity, garnering 12 new managed services deals within its technology segment in the first half of the year, compared to just 15 in all of fiscal 2014.  Further, the company signed 20 new extensions to existing contracts over the same period. 

As these new revenue programs kick in, they should have a favorable impact on the top line, especially in the final quarter of the year.

Moreover, the upcoming launch of a full service office in Frankfurt, Germany, and additional penetration anticipated in key Asian markets, such as China and Hong Kong, should also add to future growth. 

As this growth begins hitting the bottom line in the quarters ahead, we expect it to drive a substantial rebound in EPIQ’s stock from its currently market-depressed level.

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