Ciber: An IT Bargain with Big Upside

According to Morningstar:

CIBER (CBR) is a system integration and information technology (IT) services consulting firm. CIBER provides IT system integration consulting and other IT services primarily to governmental agencies, and Fortune 1000 and middle market companies across industries. The Company provides its clients with a range of IT services, including custom and package software development, maintenance, implementation and integration. To a lesser extent, the Company also resells certain IT hardware and software products. CIBER operates in five business segments: Commercial Division, European Division, State & Local Government Division, Federal Government Division and Enterprise Solutions Division. On April 15, 2008, the Company’s Europe division acquired a Norwegian SAP consultancy. In January 2009, the Company completed the acquisition of Iteamic Private Ltd. In February 2009, the Company completed the acquisition of Canon Technology Solutions, Inc.

Ciber finished 2008 with record sales and earnings yet the share price retreated by 71% from a September 3rd yearly high of $8.97 to Monday’s $2.60. Most of the drop came simply due to putrid market conditions but CBR shares had hit $2.95 in the November sell-off before rallying back to $5.66 as recently as this January.

The credit market freeze caused CBR to issue over 7 million new shares to refund a debt issue that was coming due. The arbitrage selling pushed the shares to a new all-time low of $2.03 a few weeks ago and the shares have been recovering since then.

Fundamentals look excellent. Here are the per share numbers for the past seven years as reported by Value Line:

Year ….. Sales … C/F ...... EPS ….. B/V ….... Avg. P/E .... 52-wk. Range

2002 …. 9.49 …. 0.40 ….. 0.22 …. 5.20 ……. 32.5x ……$4.46 - $11.70

2003 … 11.81 … 0.53 ….. 0.31 …. 5.20 ……. 23.5x ……$3.80 - $11.05

2004 … 13.48 … 0.70 ….. 0.45 …. 6.04 ……. 19.5x ……$6.35 - $11.41

2005 … 15.41 … 0.68 ….. 0.38 …. 6.07 ……. 19.8x ……$5.73 - $9.77

2006 … 16.13 … 0.69 ….. 0.40 …. 6.74 ……. 16.3x ……$5.54 - $7.40

2007 … 17.81 … 0.77 ….. 0.47 …. 7.48 ……. 16.1x ……$5.83 - $9.03

2008 … 19.52 … 0.82 ….. 0.50 …. 7.79 ……. 12.0x ……$2.95 - $8.97

Consensus estimates for 2009 and 2010 are now centered on about $0.41 and $0.47 respectively taking into account the extra shares that were recently issued and the weak economy.

That means that CBR shares are now offered at < 6.4x forward earnings and less than half of book value. Both of those metrics are the best valuations ever for buyers of Ciber shares. Just a quick glance at the data above will illustrate how cheap the multiple is currently compared with historical levels.

A return to even 12 times this year’s estimate would brings these shares back to $4.92 or plus 89% from their present quote. At that price CBR shares would still be lower than the annual lows in each year 2004 through 2007.

This is a nice company with revenues over $1 billion in each of the past two years and solid profitability. There have been 10 insider buys (of 318,600 total shares) versus just 1 insider sale (of 16,161 shares) over the past 6 months. Five of the buys came this month as CBR shares were being pummeled after their secondary offering.

I’m a buyer right here with a year-end target near $5 and a 2010 goal price of $6.58 or 14 times the $0.47 estimate for next year.

Disclosure: Author is long Ciber shares and short Ciber puts.

Comments

[anarchist:]

I assume the put is the August 2.5? Yahoo finance doesn't even show puts in that month.

Mar 31 10:15 AM

[Paul Price:]

It looks like the options will be discontinued after the August expirations due to low volume.

Mar 31 10:21 AM

[roborider:]

CIBER is a solid company with outstanding management and a very pragmatic approach to enterprise solutions. Stock is a solid buy at these low prices, IMHO - I would set a target of $5 by 2009 year end. Revenues have remained solid and the sales pipeline is stable and sufficient to support continued projects.

Apr 01 05:12 PM

[Paul Price:]

Ciber (CBR) Bullish Technical Alert - Trend Up 30%
23 minutes ago - Comtex Smartrend(r)

Related Companies
Symbol Last %Chg
CBR 3.98 6.42%

As of 1:00 PM ET 8/27/09
Ciber (NYSE:CBR) is trading 4.3% higher (up $0.16 to $3.90) today on volume of 212,033 shares. The stock has traded within a 52-week range of $2.03 and $8.97.

Ciber is currently above its 50-day moving average of $3.30 and above its 200-day moving average of $3.52.

SmarTrend is bullish on shares of CBR and our subscribers received an Uptrend alert on April 02, 2009 at $3.00, which has returned 30% to date.

Aug 27 01:07 PM

[Paul Price:]

CIBER INC (NYSE:CBR) Strong Uptrend

Smart Scan Chart Analysis confirms that a strong uptrend is in place and that the market remains positive longer term. Strong Uptrend with money management stops. A triangle indicates the presence of a very strong trend that is being driven by strong forces and insiders.

Based on a pre-defined weighted trend formula for chart analysis, CBR scored +100 on a scale from -100 (strong downtrend) to +100 (strong uptrend):


+10 Last Hour Close Above 5 Hour Moving Average
+15 New 3 Day High on Friday
+20 Last Price Above 20 Day Moving Average
+25 New 3 Week High, Week Ending September 19th
+30 New 3 Month High in September

+100 Total Score

Sep 18 11:53 AM