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How State Taxes Put a Bigger Pinch on the PoorIKON Office Solutions (NYSE: IKN) provides
document management systems and services to business and government clients. The firm leases/sells name-brand office equipment and provides associated office supplies, equipment maintenance programs, technical support and lease financing. It also offers document management outsourcing, electronic file conversions, facilities management and training. IKON operates from over 400 locations in North America and Western Europe. Cadbury Schweppes (NYSE: CSG) and Luxottica Group (NYSE: LUX) are among the firm's customers. Xerox (NYSE: XRX) is a major competitor.
The firm pleased investors last week, when it guided fiscal Q2 EPS to the range 22-24 cents. Analysts had been expecting 18 cents. Management also affirmed FY08 EPS guidance of 92-98 cents (95 cent consensus). Cross Research subsequently upgraded its recommendation on the stock to "buy", in order to reflect improved equipment sales and IKN's scarcity value.
IKN shares
popped on the news and have since been consolidating the gain in a bullish "flag" pattern. Equities frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Altogether, brokers now recommend the issue with one "buy", four "holds" and two "underperforms". Analysts see a 13% growth rate, through the next year. The IKN P/E ratio (11.48), PEG ratio (1.19), Price to Sales ratio (0.21), Price to Book ratio (0.64), Price to Cash Flow ratio (5.05) and Price to Free Cash Flow ratio (8.72) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 95% of the outstanding shares. Over the past 52 weeks, the stock has traded between $6.73 and $16.11. A stop-loss of $8.15 looks good here. Note that the firm is expected to report Q2 results on April 24th, before the open.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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