Ingram Micro Inc. (IM) is Cheap…But for a Reason

Page 1 of 2
Ingram Micro Inc. (NYSE:IM) has underperformed its peers over recent years.  The shares have not enjoyed the same gains as similar stocks within technology due to margin pressure and lower earnings growth.  Ingram Micro has had many issues, ongoing problems with an ERP implementation, increasing competitive pressure, concern over their ability to integrate Brightpoint and softening demand in its core distribution business.  That said, the stock looks inexpensive and the negative sentiment may be more than priced into the shares.  Ingram Micro’s growth profile has improved.  Primary concern from the Street now surrounds management’s ability to execute on acquisition integration and improve profitability in a somewhat difficult operation environment.
Ingram Micro Inc. (NYSE:IM)Ingram Micro Inc. (NYSE:IM) description

Ingram Micro is a wholesale distributor of information technology across the world.  It also provides sales, marketing and logistics services globally.  IM distributes equipment from network, hardware, computer peripherals, point of sale (POS), mobile, and consumer electronics manufacturers.

The company made three acquisitions in 2H12, BrightPoint, Aptec and Promark Technology.  BrightPoint further expands IM’s exposure to mobile technology and accounts for around 95% of the incremental revenue from acquisitions.  The other two bolt-on acquisitions also improve the revenue profile of Ingram Micro.  Aptec expands the geographic footprint in Africa and the Middle East and Promark increases IM’s government exposure.

Improved profile…

IM’s growth outlook has improved over the past six months and shareholders could benefit from the acquisitions and other changes.  First, Paul Bay has taken over as President of North American Operations and is charged with growing the higher margins services business.  While this will take time, it should contribute positively to margins over the coming years.  Second, the acquisitions mentioned above combined are expected to result in at least a 15% increase in sales.  The Brightpoint acquisition is the most influential due to its size and different markets.  It increases exposure to mobile technology and smart phones. This improves top line growth since this end market has an above average growth forecast.  Specifically, exposure to Apple Inc. (NASDAQ:AAPL) increased from 6% of sales prior to the acquisitions to 11% after.  This is major since Apple sold over 130 million iPhones in 2012.  On top of this Apple is rumored to be launching a lower cost iPhone in 2013, which could put IM technology into the hands of many more users around the world.  Also, margins should improve since Brightpoint is a more profitable business.  There is also an opportunity for cost synergies that would be realized over the next few years.  Synergies can help offset margin pressure from an increasingly competitive environment.

…and IM’s cheaper than competitors…

IM trades at 0.84x book value, up from 0.74x earlier this month, but below the 1.0x multiple of competitors. IM’s TTM P/E is 9.1x, slightly below competitor SYNNEX Corporation (NYSE:SNX), trades at 9.17x, and Tech Data Corp (NASDAQ:TECD), trades at 10.8x earnings.  SYNNEX, Tech Data, and IM all have debt to equity ratios that are quite similar so it is not a discount due to higher debt ratios.  On top of this SYNNEX and Tech Data have negative earnings growth while IM doubled its income in the last year.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!