At the current price of $61, what is the market’s view of PC Connection’s future operating performance? PC Connection’s common shares will need to reach $103 to achieve average annual stock market performance of 9.0% over the next 6 years. Upper quartile performance will require a $121 PC Connection stock price by 2029.
Executive Summary
- Price Target Research identifies PC Connection as having: high financial strength, stability, below average expected growth, and low profitability. Risk Profile is a big positive influence on PC Connection’s valuation while Growth is a big negative influence.
- Low valuation, above market shareholder returns. Current valuation levels are below average relative to the PC Connection Peer Group. Recent market returns have outperformed the PC Connection Peer Group. Total shareholder returns expected to lag the overall equity market. Based on current investor expectations, PC Connection shares should reach a level of $93 by 2029 — an 7.8% per year total shareholder return. A 2029 stock price of $103 would reflect median performance and a price of $121 would be required to reach upper quartile performance.
- PC Connection’s historical growth is slightly below average. Historical growth has been below average relative to the PC Connection Peer Group and forecasted growth is relatively below average. Revenue Growth has lagged. This factor has negatively affected market perceptions of PC Connection. PC Connection’s historical income statement growth has been in line with balance sheet growth. Revenue growth has paralleled asset growth; earnings growth has paralleled equity growth and return on equity has been stable. PC Connection’s consensus growth expectations are lower than historical growth.
- Asset Turnover is group leading. This factor has strengthened market perceptions of PC Connection. The company has below average cash and will have to work to generate attractive investment opportunities and improve valuation.
- Risk Profile has been PC Connection’s biggest valuation strength. PC Connection’s risk profile is very favorable. Overall variability has been relatively low with relatively low revenue variability, only average E.P.S. variability, and very low stock price volatility. Financial Strength is relatively high and earnings’ expectations are relatively high. The debt/capital ratio has declined very significantly.
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