ePlus, Inc PLUS
June 04, 2002 - 1:57pm EST by
2002 2003
Price: 9.10 EPS
Shares Out. (in M): 0 P/E
Market Cap (in $M): 90 P/FCF
Net Debt (in $M): 0 EBIT 0 0

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I think it's time to place a serious bet on – not over – the internet. Patience, over the long duration of the insanity, is about to pay off. I propose a candidate – ePlus, to replicate what Microsoft did for another vital new technology.

The landscape is littered with B2B wreckage. This stock sold as high as $74 a couple of years ago. From its public initiation in 1996, ePlus has made money showing businesses how to work the internet for profit. Starting as a public company in late 1996, ePlus has always made money while growing its book value from $2.71 to $9.45 (above current market), gaining a national presence, and growing sales from $56 million to $306 million while only doubling its shares outstanding to 10 million as ePlus purchased strategic companies for cash and stock.

Since the company is covered by Value Line, I won't go into more financials. Besides, it's the inferences that count.

E-Plus provides internet-based B2B management solutions for IT and other operating functions – in other words, software, training and management. ePlus also leases and finances equipment. Its 1500 clients are mainly middle-management players with revenues of $25 million to one billion dollars.

Earnings were $.98 in 1999, $.91 in 2000, and $.80 in 2001. Recent earnings are estimated to continue in the $.80 range. I don't expect much progress on this front for the coming year or so because IT spending is down and it has ongoing greatly increased promotional costs to secure a major volume increase that will pay off in a number of efficiencies.

* * *

Here's what I really like:

• Hard-nosed management who from the start knew the limitations of the new (internet) game and played it smart and profitably. That alone sets them miles above the rest of the herd;

• A stock repurchase plan for up to 750,000 shares;

• Over management equity ownership, 35% institutional ownership with 1 million shares added in the past two reporting quarters;

• $2.50 per share in cash;

• An unlimited field for expansion both in product and clientele;

• Great strategic partnering: Joint marketing arrangements with the finance subsidiaries of Chase Manhattan and Wachovia that enable ePlus to market certain services to these banks' customers.


Catalyst: Much greater volumes over the next eighteen months, a possible resumption of IT spending, coupled with investor recognition of one of the true pioneering survivors of the tech bubble.
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