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GP Strategies Corporation (NYSE:GPX) is a global performance improvement solutions provider of sales and technical training, e-learning solutions, management consulting and engineering services. With consistently growing revenues and net income, the company represents a solid growth play that may also be trading at a discount to its fair value.

A Rapidly Growing Company…

GP Strategies is a sales and technical training provider that has grown significantly through both internal growth and the acquisition of complementary businesses. Since 2006, the company has completed 18 acquisitions that have expanded its offerings into multiple industry segments and expanded its global presence into areas such as the U.K. and Asia.

Last quarter, the company reported revenues that jumped 46% and net income that increased 69%. The results suggest that the company is seeing significant margin expansion on its service offerings, which was driven by the fact that its acquired U.K. businesses were more profitable than its existing businesses in the segment before the acquisitions.

These results were primarily driven by growth in the Professional & Technical Services division, which jumped 41.6% due to its acquired RWD business, LNG fueling station increases and an increase in lean consulting and technical training. However, the Learning Solutions division, its largest, also jumped 19.7% due to acquisitions in the U.K. and an increase in U.S. services.

…With a Mixed Valuation…

Despite its rapid growth, GP Strategies appears undervalued using some key metrics and overvalued using others. For instance, the company's forward price-earnings ratio is just under 14x, which given its growth rates suggests that it may be undervalued on a price-earnings to growth (PEG) basis, despite the fact that Yahoo! Finance lists a PEG of 1.67.

The company's price-book ratio of 2.19 suggests that it's not a super attractive value based on its assets, but that shouldn't be surprising given that it's a service-based company. Instead, investors may want to focus on its price-sales ratio of 0.90x, but even that relatively low figure suggests that it trades with a slight premium to some industry competitors.

Finally, the company's earnings yield of 6.04%, operating earnings yield of 6.05% and free cash flow yield of 6.12% aren't particularly high but are certainly good. Two other players with potentially better valuations in the industry may be Universal Technical Institute Inc. (NYSE:UTI) and Strayer Education Inc. (NASDAQ:STRA), which have more favorable valuation metrics.

…Some Risks to Consider…

GP Strategies, like many other companies in the space, also has many risks that investors should carefully consider before buying. First, the company's revenues have somewhat consolidated in some major customers, including General Motors, which accounts for 17% of its consolidated revenues—somewhat risky given the perilous U.S. automotive market.

With its extensive acquisitions, many of the company's assets also consist of goodwill and intangible assets that may experience impairment in the future. The prospect of impairment may be considered less important, since it is a non-cash charge, but the inclusion of intangible assets means its balance sheet ratios may be thrown off.

Finally, Sagard Capital Partners controls a 17.8% ownership stake in the company and may therefore exert influence over certain corporate matters. Moreover, the group could choose or be forced to liquidate the position and potentially harm existing shareholders. While not likely, these are possibilities given the large beneficially owned stake.

…But a Solid Stock Overall

GP Strategies is a strong growth stock that has shown its abilities to effectively grow through acquisitions. This track record has translated to a 26% jump in its share price this year and a 51% jump over the past five years, which is certainly better than the S&P 500 and many other indices. As a result, this is one stock that investors may want to consider for their portfolios.

Source: GP Strategies: Strong Growth With A Mixed Valuation