Posting Profits at Pitney Bowes

11/20/2015 7:00 am EST

Focus: STOCKS

Mark Skousen

Editor, Forecasts & Strategies, High-Income Alert

Our latest featured recommendation is a leading provider of customer communications technologies in more than 100 countries, explains Mark Skousen, editor of High-Income Alert.

Based in Stamford, Connecticut, Pitney Bowes (PBI) provides mail equipment and integrated mail solutions to both large and small businesses. 

The company's software improves the quality of data, helps with product and sales analysis, and—bottom line—saves companies money.

It is a true technology leader. The firm’s intellectual property portfolio includes more than 3,300 patents in areas such as ticketing, cellular phone payment, shipping, laser printing, encryption, and mail production.

The company currently serves 90% of the Fortune 500, plus more than 1.5 million small businesses. True, sales and earnings have declined over the last year, but that is about to change.

The Street expects Pitney to earn $1.82 a share this year and $2.04 a share in 2016. And I believe next year’s numbers are far too conservative.

I’m not the only one. President and CEO Marc Lautenback just recently filed a Form 4 with the Securities and Exchange Commission indicating that he just purchased 12,000 shares at $20.81 a share, an investment of a quarter-million dollars. 

It wasn’t his first purchase. He currently owns more than 104,000 shares. And institutional investors own 90% of the outstanding shares here.

What do they like about the stock? Like me, they almost certainly believe that earnings will come in ahead of expectations. (That’s the primary mover of stocks in the short-term.) But the shares are also very inexpensive.

At current levels, Pitney sells for just 11 times earnings—compared to 17 for the S&P 500—and less than 10 times my forecast for 2016. 

In addition, the firm enjoys an 18% operating margin. Management is earning a whopping 79% return on equity. And the current dividend yield is 3.8%. 

Put it together and you have an attractive opportunity from a total return perspective. We've traded this stock profitably before, and again, recommend the shares.

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