Seeking Alpha

ePlus – Model of Deep Value
May 8, 2009

ePlus, Inc. (PLUS), ($14.10) sells IT equipment, services and third-party & proprietary software, and provides leased equipment to customers.

Their growth has been excellent – over the past 5 fiscal years revenue has grown 183% and earnings per share have jumped 112%. A cursory look at their financials will lead you to believe that earnings are lumpy, but that is mostly due to the legal costs of fighting 2 infringement suits and the resulting settlements. The above figures do not include either.

PLUS got entangled in an option dating related restatement of financials and consequently got delisted from the NASDAQ in 2007 and relisted on the NASDAQ last summer. This is what I believe created the compelling value proposition in PLUS shares. While the stock was being ignored because it was on the pink sheets, revenue and earnings continued to grow, while cash piled up on the balance sheet.

Where does that put PLUS today? At $14.20, PLUS is trading at only 67% of book value and at only 7 times trailing 12 month earnings. The market cap is currently about $117 million and they have $87 million in cash!

With virtually no recourse debt and a share buyback of up to 500,000 shares (6% of outstanding) already approved while insiders & directors own 51% of the Company, one may expect to see some shareholder value enhancing moves, like the Company aggressively buying back stock or an opportunistic acquisition of a competitor at a distressed price (similar to those they’ve done in past economic downturns).

Competitors include Insight Enterprises, Inc. (NSIT) and Agilysys, Inc. (AGYS).