Insight Enterprises - Undervalued IT Firm In An Expensive Market

| About: Insight Enterprises, (NSIT)


Insight Enterprises (NSIT) is an American IT services company that licenses and distributes technology solutions for commercial partners.

Insight is undervalued in its industry, carries low debt, and has maintained strong revenue CAGR of 6.2% over the past 10 years.

Insight is expanding its core business through partnerships with local governments and K-12 educational providers.

Insight is developing itself in new industries including cloud solutions and mobility analytics to grow beyond its core business.

Company Background

Insight Enterprises (NSIT) is a global information technology services company operating out of North America, Europe, the Middle East, Africa, and Asian-Pacific markets.

Insight began with a core business focused on providing technology solutions for businesses and government clients. These include the licensing and distribution of technology products from its corporate partners including Google, HP, Cisco, Adobe and many others. Insight's core business provides e-commerce and logistics solutions for distributing technology at the commercial level. In recent years, Insight has expanded beyond its core partners to develop in the markets of K-12 education, healthcare providers, and government agencies. Along with this, Insight is developing its service sales business through solutions including: infrastructure optimization, enabling workforce solutions, and customer engagement. Through strategic acquisitions, Insight has positioned itself as a growing provider of cloud solutions and data security and currently targets mid-size companies. As a mature company in the IT Services industry and a growing portfolio of business solutions, Insight Enterprises is an overlooked company with strong upside in the future.

Insight is an Undervalued IT Firm with Stable, Historical Growth

Insight may be considered a smaller IT firm in the larger market with a market capitalization of $1.53B but has proven consistent, stable returns over the past decade. Revenue growth in the past ten years is approximately 6.2%, and this growth rate has maintained stability with 6.6% revenue growth from 2013-2016. This is an important aspect of Insight's financials as the firm is mature and has not been subject to rampant overvaluation in the market. Compared to the larger information technology industry, Insight is undervalued with a P/E ratio of 15.94 as compared to 27.01 for the industry average. While Insight does not distribute dividends, this is an advantage for the growth of the company as it leverages its low debt to complete acquisitions and expand into new markets. Insight has working capital of $544 million and short term debt of only $480,000.

Recent Strategic Acquisitions Open New Opportunities

Insight has completed multiple strategic acquisitions to allow it to expand beyond its core business. In 2015, Insight acquired BlueMetal Architects and developed services in mobile application design. In 2016, Insight acquired Ignia and expanded global presence in Asia-Pacific markets for mobility analytics and Cloud solutions. Insight's most recent acquisition was that of Datalink, which allowed Insight to strengthen its position as a provider of enterprise data solutions and Cloud solutions. As mentioned previously, Insight's high working capital ratio and low debt provide the firm with the flexibility to continue to make strategic acquisitions, positioning Insight advantageously to get a step ahead of its competitors in entering new market spaces.

Expansion of Core Business to New Markets

In the past Insight provided deployment of commercial business products to corporations and built upon this as its core business. Recently, Insight has targeted distributing of educational software to K-12 education clients and data analytics solutions to government agencies and healthcare providers. Development in these markets provides great scaling opportunities for Insight's core business practices. Along with this, Insight has a growing international presence with 27% of sales coming overseas. Insight has targeted mid-size companies overseas to capitalize on opportunities not being exploited by established overseas competitors.

Potential Risks

Insight's expansion into international markets exposes it to varying economic systems, bringing the risks of global market changes beyond its control. The IT services industry is very competitive, and Insight relies on suppliers to commercially distribute its partnered products, and pricing pressures may cause a decrease in revenue.

Financial Figures of Importance

10-year revenue CAGR: 6.2%

Net Sales: $5.49B

EV/EBITDA: 8.00 vs. 9.98 industry

Debt/Equity: 0.38

52 Week Range: $28.15 - $53.19


Insight remains an interesting play and is an undervalued, mature firm in the IT space. With 10-year revenue CAGR of 6.2%, Insight has stable historical revenue growth and is undervalued compared to the greater IT services industry. As Insight continues to expand its core business to new markets, completes acquisitions to compete in cloud solutions and mobility analytics, and develops its international presence, NSIT will continue to remain a growing player in the IT market.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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