Industrials have been my favorite sector for the fourth quarter of this year; my latest recommendati...
Manhattan Associates: High Tech Supply Chains
12/28/2016 7:00 am EST
Today, online shopping platforms and other retailers offer same-day delivery in select markets. Or you head to a nearby store to pick up items within hours of completing your purchase, observes Peter Staas, contributing editor to Capitalist Times.
Atlanta-based Manhattan Associates (MANH) helps retailers perform these feats of seeming magic while improving efficiency, taking costs out of the system and improving working capital.
The company’s products and services enable retailers, wholesalers and manufacturers to optimize their supply chains, make informed decisions about inventory levels and locations, and meet consumers’ expectations for service and convenience.
Not only does Manhattan Associates maintain a robust R&D budget to stay ahead of the curve, but it must also invest in sales associates that assist customers with these complex implementations, which often occur in stages and require an extended period of investment.
This complexity sometimes leads to lumpiness in services revenue. At the same time, providing solutions for complex problems results in solid margins — 59.2 percent in the third quarter.
Maintenance revenue on software licenses, which have a renewal rate of more than 90 percent, provides a stream of highly visible cash flow.
Manhattan Associates also stands to benefit from more and more consumer-goods companies seeking to cut out the middleman and ship direct to consumer, a transition that requires distribution centers to accommodate the rapid fulfillment of smaller-quantity orders.
As one of the leaders in supply-chain management technology and tools that support the convergence of digital and physical retail spaces, Manhattan Associates should continue to post steady sales and earnings growth.
Manhattan Associates rates a buy up to $55 per share, though investors may want to ease into this position to take advantage of any further weakness.
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