TeleTech: Looking to Buy on a Dip as Shares Doubled in Last 5 Months

As the market has climbed 40% the last few months, my fundamental stock screen named “Diamonds in the Rough” now only returns 2 results, down from the 15 or so from February. One of these is TeleTech (TTEC), an outsourcing services company that focuses on customer management and enterprise management solutions.

As companies continue to cut operational costs in order to be more efficient and profitable, outsourcing is a strategy that has a bright future. The closing of call centers by Sprint (S) was seen as a major hurdle, but shares have recovered as other business opportunities provide a consistent revenue stream, and the company’s earnings power is underestimated.

Shares currently trade 12.6X forward earnings, 0.63X sales, 6.56X free cash flow, and at a PEG of 0.59. Looking at valuation metrics that a potential acquirer would use, TeleTech is insanely cheap at 0.6X Enterprise Value/Revenue and 4.8X EV/EBITDA.

The balance sheet is also solid with ample liquidity and a debt to equity ratio of just 0.13, while insiders are 46.58% owners in the company’s shares.

TeleTech was recently added to the S&P 600 which will add some institutional ownership in shares, currently at 51%, as index managers have to buy shares for portfolios.

Many Analysts that cover TeleTech have a Hold rating on the firm currently, which leaves room for upgrades to help boost shares.

On a technical basis, shares are currently at the top of a channel up formation, with $14.50 a possible breakout level, so looking to buy shares on a dip to around $12 is the way to play this stock. Shares traded at $26 in June of last year, and there is no reason we can’t see a move back to those levels, if shares break through $16.40 resistance, which aligns with the 200 week exponential moving average.

Disclosure: Looking to Buy shares at $12

Comments

[rick12345:]

I'd be holding off in the short term, just to see what the markets do; Now is not a good time to invest vast sums of money into equities. Sit back for a couple of months. Long term you won't lose, and if the markets do crash, you'll be able to buy them at half the current price, if not less.

Jun 08 10:48 AM