Kevin Stecyk

Acquisition Of CDW Highlights Challenges Of Shorting On Valuation Alone

NSIT

Market Cap: $1.1B
Enterprise Value: $1.3B
Revenue: $4.2B
Income: $65.5M
Forward PE: 12

CDWC
Market Cap: $6.74B
Enterprise Value: $5.8B
Revenue: $7.1B
Income: $281M
Forward PE: 20


So for nearly double the revenue, CDWC gets a 6-7X multiple on market cap and an over 4 multiple on Enterprise value. Granted CDWC enjoys larger margins and is likely a better run company, as Alan earlier pointed out. In my view--again, the wrong view--being a retailer in computer goods is nothing outlandish. NSIT could have hired some key talent where it is lacking and embarked on a fierce retailing war.

I don't see the comparison between a disk drive manufacturer and a retailer. If CDWC only sold disk drives, then I'd be more sympathetic.

Anyway, it appears that we agree to disagree, and that's okay. That's what makes markets.

Thank you for your comment. :-)