A big problem for distributors is how to keep prices at levels that will allow their clients to effectively do business with end users. There is an information technology provider in Clearwater, Florida that doubtless believes it's a matter of scale. The firm is the second-largest distributor of computer products in the world.
Tech Data Corporation (NASDAQ: TECD) is a leading distributor of IT products, with more than 90,000 customers worldwide. The firm sells microcomputer systems, peripherals, networking equipment and software products to resellers, direct marketers and retailers. In addition, the company provides training, technical support, external financing options and configuration services. Suppliers include Alcatel-Lucent (NYSE: ALU), Apple Inc. (NASDAQ: AAPL), Cisco Systems (NASDAQ: CSCO), Hewlett-Packard (NYSE: HPQ), International Business Machines (NYSE: IBM), Intel (NASDAQ: INTC) and Microsoft (NASDAQ: MSFT).
Tech Data pleased investors last week, when it announced Q2 EPS of 50 cents and revenues of $5.61 billion. Analysts had been looking for 30 cents and $5.3 billion. The CEO attributed the successful quarter to "very strong" revenue growth in the Americas and a "significant turnaround" in Europe. Management also guided Q3 revenues to $5.75-5.90 billion ($5.67 billion consensus).
The share price popped on the news and then began formation of a bullish "pennant" consolidation pattern. Stocks frequently exit a pennant with a move in the same direction they were traveling when they entered it. In this case, that would be to the upside.
Brokers recommend the issue with one "strong buy," two "buys," nine "holds" and three "sells." Analysts see a 21% growth rate, through the next year. The TECD Price to Sales ratio (0.10), Price to Book ratio (1.20), EPS Growth (0.01 to 0.50 yr/yr) and Revenue per Employee ($2.74M) compare favorably with industry, sector and S&P 500 averages.
Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $33.01 and $43.74. A stop-loss of $34.25 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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