Computer Task Group (CTG, Financial)Â is an international IT staffing and service company. The company has a large presence in the fast-growing healthcare market, implementing electronic health records and health information exchanges. Computer Task is also involved in providing services to technology providers, financial services, and energy. The company trading at historically and relative cheap valuation. Computer Task is selling at five years low across all valuation ratios and is selling near its 52-week lows. The company has been consistently profitable and has a 3.5% dividend to boot. Computer Task has a clean balance sheet with no long-term debt and has $2.3 per share in cash. With the firm selling at five-year lows and having a clean balance sheet provides more than enough protection potential investors.
Business overview
Computer Task provides its IT staffing and services to a wide range of clients globally. The company revenues are protected by the diversity of its clients who are spread across the globe. Computer Task has a globally diversified revenues stream and its breakdown by region is 81% in North America and 18% in Europe. Revenues by vertical markets as a percentage of total revenues for the quarter ending in April 3, 2015 are technology provides 28%, health care 24%, financial services 7%, energy 5.6%, and general markets 34%. The company has a strong balance sheet with no long-term debts.
Financials
For the 13 weeks ending on April 03 2015, Computer Task Group revenues decreased by less than 1% to $97.5 million. Net income decreased 60% to $1.3 million and revenues from North America segment increased by 3% to $79 million. Revenues from European segment decreased 14% to $17 million. The company’s dividend remained flat at $0.06 cents per share. Earnings per share decreased from $0.27 cents to $0.08 per share. Over the last five years the company free cash flow has grown at around 31%, revenues has grown at 6%, and book value has grown at 9%. The company’s cash of $34 million make up around 30% of the market cap and has gross profits of $79 million. Computer Task gross profits make up around 50% of the firm market cap.
Insider ownership and compensation
Management owns around 32% of the company’s stock and had total compensation for 2014 of $5,660,160. Compensation increase for management by 5% from the previous years.
Management and Compensation:
- CEO James R. Boldt made $2,766,774.
- Interim CEO Brendan M. Harrington made $606,127.
- Interim CFO and Treasurer John M. Laubacker made $326,129.
- Senior Vice President of Health Solutions Ted Reynolds made $748,432.
- Interim Executive Vice President of Operations Filip J.I. Gyde made $700,291.
- Senior Vice President and General Manger Arthur W. Crumlish made $513,407.
Insider Ownership:
| Major Direct Holders (Forms 3 & 4) |
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Valuation and return
| Â | Â | ||
| Price/Net Current Asset Value | 3.60 | Â | Â |
| Price/Tangible Book | 1.60 | Â | Â |
| Price/DCF (Projected) | 0.70 | Â | Â |
| Price/Median PS Value | 0.90 | Â | Â |
| Price/Peter Lynch Fair Value | 1.40 | Â | Â |
| Price/Graham Number | 1.00 | Â | Â |
| Earnings Yield (Greenblatt) | 12.90 | Â | Â |
| Forward Rate of Return (Yacktman) | 18.51 | Â | Â |
Computer Task currently trades at around 1.5x gross profits and 7.6x EV/EBIT. The company has an earning yield of 12.90% and a forward rate of return of 18.5%. Computer Task is selling for 0.8x discount cash flow. When I did discount cash flow I used a 15% and 17% discount rate which is far larger than most investors do. This gives the company a current present value range $9.89 to $11.61. Based on discount cash flow the company has a margin of safety between 22% and 33%. Also by using two large discount rate keeps the valuation conservative and reasonable. When you add it all up, the company is a no-brainer at its current price.
