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Bear of the Day: ePlus Inc. (PLUS)


Although tech stocks have been dominating Wall Street for a good majority of the year, not every company in the sector has found the same success. Indeed, some stocks, such as ePlus Inc. (PLUS), are struggling to maintain relevancy in today’s ultra-competitive tech environment.

ePlus is a provider of IT services and financing. The company provides a variety of solutions aimed at helping clients optimize their IT infrastructure and supply-chain processes, including services related to cloud computing, security, mobility, and datacenter operation.

After missing revenue estimates by a sizeable amount in its most recent quarter, ePlus has slumped to a Zacks Rank #5 (Strong Sell).

Latest Earnings Results

ePlus reported its fiscal second-quarter earnings results last week. The company posted earnings of $1.27 per share, matching our consensus estimate. However, revenues of $371 million were flat on the year and significantly below our consensus estimate of $414 million.

As a result of these relatively weak results, shares of ePlus plummeted more than 20% in the direct aftermath of its report. Since then, the stock has struggled to generate positive momentum, likely because of weakened analyst sentiment.

Estimate Revisions and Key Stats

Since its recent report, we have seen slumping earnings estimates for ePlus. In fact, the Zacks Consensus Estimate for the company’s current-quarter earnings has slipped three cents over the past week. Furthermore, our consensus estimate for the company’s upcoming fiscal year has shed a penny over that same timeframe.

Additionally, investors might worry about a few other key metrics. For one, ePlus is generating cash flow growth of just 2.7% right now, which is significantly lower than its 14.4% historical average. The company is also operating with a net margin of 3.9%, making it slightly less efficient that its industry’s average net margin of 4.3%.

Better Options

While ePlus may be struggling right now, there are still other options for investors looking to add an IT services company to their portfolio right now. For example, industry heavyweights CDW Corporation (CDW) and DXC Technology Company (DXC) are both sporting a Zacks Rank #2 (Buy).

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