The company appears to be enjoying the results of a successful (and ongoing) restructuring, in which the company’s new CEO is moving up market to capture higher margin sales (e.g. laser printer sales and servicing for small and medium businesses). Both revenue and margins improved this year as a result. Additionally, the company’s balance sheet looks great, with cash more than double debt (the company has $15.50 of cash/share!). The company has a long track record of strong free cash flow, and it appears (at least with just a few data points) that its troubles have passed.
The company has recently taken actions which could indicate that it believes it might be a takeover candidate in the near future. In November, the company amended its employment agreements with senior executives, specifically ensuring continued employment and benefits in the case of a change in control, and providing for a nice bonus if terminated without good cause following a change in control. Read the full details here.
Though I find the company slightly too expensive for my liking, I’ll kepe an eye on it to see whether the margins and revenues remain elevated. I also look forward to seeing what management does with its cash balance, as this provides some insight as to what a long-term investor might expect going forward (i.e. will we see shareholder friendly actions?).
Author Disclosure: No Position.