BUSINESS
Insight Enterprises, Inc., together with its subsidiaries, provides information technology (IT) hardware, software, and services solutions in the United States, Canada, Europe, the Middle East, Africa, and the Asia-Pacific. The company’s solution portfolio includes cloud enablement, data and AI, DevOps, digital strategy, intelligent applications and edge, and IoT solutions, as well as transformation services. It also offers cloud and data center transformation; connected workplace; and supply chain optimization solutions. In addition, the company provides software maintenance solutions that offers clients to obtain software upgrades, bug fixes, help desk, and other support services; vendor direct support services; and offers Software-as-a-Service subscription products.
INVESTMENT RATING
With future capital returns forecasted to exceed the cost of capital, NSIT is expected to continue to be a major Value Builder.
Insight Enterprises has a current Value Trend Rating of C (High Neutral).
With this rating, PTR’s two proprietary measures of a stock’s current attractiveness are providing very contradictory signals. Insight Enterprises has a slightly negative Appreciation Score of 32 but a very high Power Rating of 89, producing the High Neutral Value Trend Rating.
Insight Enterprises’ stock is selling above targeted value. The current stock price of $183.75 compares to targeted value 12 months forward of $171.
This moderately low appreciation potential results in an appreciation score of 32 (68% of the universe has greater appreciation potential.)
Insight Enterprises has a Power Rating of 89. (NSIT’s very high Power Rating indicates that it has a higher likelihood of achieving favorable investment performance over the near to intermediate term than all but 11% of companies in the universe.)
Factors contributing to this very high Power Rating include: the Computers & Software – Wholesale comparison group is in an extremely strong phase currently; and recent price action has been extremely favorable. An offsetting factor is the trend in NSIT’s earnings estimates has been unfavorable in recent months.
INVESTMENT PROFILE
NSIT’s financial strength is high. Financial strength rating is 76.
Relative to the S&P 500 Composite, Insight Enterprises Inc has neutral Growth/Value characteristics; its appeal is likely to be to Capital Gain-oriented investors; the perception is that NSIT is lower risk. High stock price volatility is a relative weakness for NSIT. NSIT’s valuation is moderate: low dividend yield, moderate P/E ratio, and median price/book ratio. NSIT has unusually low market capitalization.
CURRENT SIGNALS
Insight Enterprises’ current operations are strong. Return on equity is rising, reflecting: widening pretax margins; and rising leverage.
Insight Enterprises’ current technical position is very strong. The stock price is in a 16.6 month up move. The stock has appreciated 133.1% from its prior low. The stock price is above its 200 day moving average which is in an uptrend.
ALERTS
Recent notable negative changes in investment behavior have affected Insight Enterprises Inc (NASDAQ: NSIT): negative upside/downside volume developed.
Insight Enterprises Inc (NASDAQ: NSIT) suffers from important negative changes in fundamentals: significant quarterly sales deceleration occurred, the consensus estimate for December, 2024 decreased significantly, and the consensus estimate for December, 2025 decreased significantly.
The stock is currently rated C.
Insight Enterprises Inc (NASDAQ: NSIT) stock closed at $183.75 on 2/26/24 after a slight decline of -0.9%. Moreover, above average trading volume at 120% of normal accompanied the decline. The stock has risen 0.6% during the last week and has been exceptionally strong relative to the market over the last nine months.
CASH FLOW
In 2023, Insight Enterprises generated a very significant increase in cash of +$105.1 million (+64%). Sources of cash were much larger than uses. Cash generated from 2023 EBITDA totaled +$495.8 million. Non-operating uses consumed -$14.3 million (-3% of EBITDA). Cash taxes consumed -$101.8 million (-21% of EBITDA). Re-investment in the business amounted to -$200.4 million (-40% of EBITDA). On a net basis, debt investors furnished +$109.5 million (+22% of EBITDA) while equity investors received -$183.6 million (-37% of EBITDA).
Insight Enterprises’ Non-operating Income, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by stability for the Insight Enterprises Peer Group as well. In most years, Insight Enterprises was in the third quartile and second quartile. Currently, Insight Enterprises is lower quartile at -3% of EBITDA (-$14.3 million).
Insight Enterprises’ Cash Taxes, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Insight Enterprises Peer Group. In most years, Insight Enterprises was in the third quartile and top quartile. Currently, Insight Enterprises is substantially below median at -21% of EBITDA (-$101.8 million).
Insight Enterprises’ Business Re-investment, %EBITDA has experienced a downtrend over the period. This downtrend was accompanied by an opposite trend for the Insight Enterprises Peer Group. In most years, Insight Enterprises was in the top quartile and lower quartile. Currently, Insight Enterprises is above median at -40% of EBITDA (-$200.4 million).
Insight Enterprises’ Debt Investors, %EBITDA has experienced a downtrend over the period. This downtrend was accompanied by a similar trend for the Insight Enterprises Peer Group. In most years, Insight Enterprises was in the top quartile and lower quartile. Currently, Insight Enterprises is above median at +22% of EBITDA (+$109.5 million).
Insight Enterprises’ Equity Investors, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by an opposite trend for the Insight Enterprises Peer Group. (Since 2019 Equity Investors, %EBITDA has experienced a very sharp decline.) In most years, Insight Enterprises was in the top quartile and lower quartile. Currently, Insight Enterprises is below median at -37% of EBITDA (-$183.6 million).
Insight Enterprises’ Change in Cash, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by stability for the Insight Enterprises Peer Group as well. (Since 2021 Change in Cash, %EBITDA has experienced very sharp improvement.) In most years, Insight Enterprises was in the top quartile and third quartile. Currently, Insight Enterprises is at the upper quartile at +21% of EBITDA (+$105.1 million).
Insight Enterprises’ Cash, %Revenue has exhibited little to no overall change over the period. This stability was accompanied by stability for the Insight Enterprises Peer Group as well. In most years, Insight Enterprises was in the second quartile and third quartile. Currently, Insight Enterprises is above median at +3%.
PROFITABILITY
Insight Enterprises’ return on equity has improved very significantly since 2014. The current level of 16.2% is 1.54X the low for the period and is -5.4% from the high.
This very significant improvement was due to little change in pretax operating return offset by very strong positive trend in non-operating factors.
The productivity of Insight Enterprises’ assets declined over the full period 2014-2023: asset turnover has suffered a very strong overall downtrend.
Insight Enterprises’ pretax margin enjoyed a very strong overall uptrend over the period 2014-2023.
Non-operating factors (income taxes and financial leverage) had a very significant positive influence on return on equity.
Insight Enterprises’ return on equity is slightly above median (16.2%) for the four quarters ended December, 2023.
Operating performance (pretax return on assets) is below median (6.0%) reflecting asset turnover that is at the lower quartile (1.46X) and slightly below median pretax margin (4.1%).
Tax “keep” rate (income tax management) is at median (74.4%) resulting in after tax return on assets that is below median.
Financial leverage (leverage) is substantially above median (3.62X).
GROWTH RATES
Overall, Insight Enterprises’ growth rate has slowed very considerably in recent years.
Insight Enterprises’ historical income statement growth and balance sheet growth have diverged. Revenue growth has fallen short of asset growth; earnings growth has exceeded equity growth.
Annual revenue growth has been 8.7% per year.
Total asset growth has been 15.6% per year. (More recently it has been 10.7%.)
Annual E.P.S. growth has been 20.1% per year. (More recently it has been 16.5%.)
Equity growth has been 13.1% per year. (More recently it has been 7.6%.)
Insight Enterprises’ consensus growth rate forecast (average of Wall Street analysts) is 12.0% — in line with the average of the historical growth measures.
Relative to the Insight Enterprises Peer Group, Insight Enterprises’ historical growth measures are erratic. Total asset growth (15.6%) has been upper quartile. E.P.S. growth (20.1%) has been at the upper quartile. Equity growth (13.1%) has been substantially above median. Revenue growth (8.7%) has been slightly below median.
Consensus growth forecast (12.0%) is at median.
PRICE HISTORY
Over the full time period, Insight Enterprises’ stock price performance has been variable and exceptional. Between April, 2013 and February, 2024, Insight Enterprises’ stock price rose +914%; relative to the market, this was a +220% gain. Significant price moves during the period: 1) September, 2022 – January, 2024: +124%; and 2) March, 2020 – March, 2022: +155%.
TOTAL INVESTMENT RETURNS
Current annual total return performance of 63.9% is upper quartile relative to the S&P 500 Composite.
In addition to being upper quartile relative to S&P 500 Composite, current annual total return performance through January, 2024 of 63.9% is upper quartile relative to Insight Enterprises Inc Peer Group.
Current 5-year total return performance of 32.1% is upper quartile relative to the S&P 500 Composite.
Through January, 2024, with upper quartile current 5-year total return of 32.1% relative to S&P 500 Composite, Insight Enterprises’ total return performance is upper quartile relative to Insight Enterprises Inc Peer Group.
VALUATION BENCHMARKS
Relative to S&P 500 Composite, NSIT’s overall valuation is low. The highest factor, the price/equity ratio, is slightly above median. Price/earnings ratio is slightly below median. Ratio of enterprise value/assets is below median. Ratio of enterprise value/earnings before interest and taxes is below median. The lowest factor, the ratio of enterprise value/revenue, is lower quartile.
Relative to Insight Enterprises Peer Group, NSIT’s overall valuation is quite high. The highest factor, the price/equity ratio, is upper quartile. Price/earnings ratio is at the upper quartile. Ratio of enterprise value/earnings before interest and taxes is near the upper quartile. Ratio of enterprise value/assets is at the upper quartile. The lowest factor, the ratio of enterprise value/revenue, is at the upper quartile.
Insight Enterprises has a large value gap compared to the median. For NSIT to achieve median valuation, its current ratio of enterprise value/revenue would have to fall from the current level of 0.73X to 0.65X. If NSIT’s ratio of enterprise value/revenue were to fall to 0.65X, its stock price would be lower by $-25 to $158.
For NSIT to achieve upper quartile valuation relative to the Insight Enterprises Peer Group, its current ratio of enterprise value/revenue would have to rise from the current level of 0.73X to 0.75X. If NSIT’s ratio of enterprise value/revenue were to rise to 0.75X, its stock price would increase by $4 from the current level of $184.
VALUE TARGETS
With future capital returns forecasted to exceed the cost of capital, NSIT is expected to continue to be a major Value Builder.
Insight Enterprises’ current Price Target of $176 is little changed from the current price of $183.75.
This moderately low appreciation potential results in an appreciation score of 32 (68% of the universe has greater appreciation potential.)
Notwithstanding this moderately low Appreciation Score of 32, the high Power Rating of 89 results in an Value Trend Rating of C.
Insight Enterprises’ current Price Target is $176 (-5% from the 2023 Target of $186 and -4% from the 02/26/24 price of $183.75). This plateau in the Target is the result of a +5% increase in the equity base and a -10% decrease in the price/equity multiple. The forecasted increase in cost of equity has a very large negative impact on the price/equity multiple and the forecasted decline in growth has a large negative impact as well. Partially offsetting these Drivers, the forecasted increase in return on equity has a very large positive impact.
PTR’s return on equity forecast is 21.2% — above our recent forecasts. Forecasted return on equity enjoyed a dramatic, variable increase between 2015 and 2023. The current forecast is well above the 2015 low of 11%.
PTR’s growth forecast is 8.0% — below our recent forecasts. Forecasted growth enjoyed a dramatic, steady increase between 2015 and 2023. The current forecast is above the 2015 low of 5%.
PTR’s cost of equity forecast is 12.0% — in line with recent levels. Forecasted cost of equity suffered a dramatic, variable increase between 2015 and 2023. The current forecast is above the 2015 low of 7.0%.
At Insight Enterprises’ current price of $183.75, investors are placing a positive value of $69 on its future investments. This view is consistent with the company’s most recent performance that reflected a growth rate of 14.0% per year, and a return on equity of 16.1% versus a cost of equity of 9.8%.
PTR’s 2025 Price Target of $176 is based on these forecasts and reflects an estimated value of existing assets of $118 and a value of future investments of $58.
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