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Investment Q&A

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Q: Please provide your analysis of its quarterly results released this morning. Is it attractive at this price or are there better alternatives in its sub-sector?
Thanks, Tim.

Asked by tim on May 17, 2023

5i Research Answer:

SFTC operates as an IT solution provider, and now trading at 15.7x times' Forward P/E. In the 2Q, SFTC’s revenue declined by -6% to $209M, missing the estimates of $226M and EPS was $0.12, beating estimates of $0.06. The balance sheet is okay, with net debt of $132M. Net debt to EBITDA of 1.7x. Revenue has been largely flat in the last five years. The company has started repurchasing shares more aggressively in recent quarters, indicating management believes shares are undervalued. Overall, given the growth profile, we like other names better such as CDW, GIB.A.

We think the recent stock decline is justified given the slowdown in the IT market overall, and not so impressive execution from SFTC in particular.

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