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Startek: Emerging Stronger After COVID

Mar. 08, 2021 9:22 AM ETStartek, Inc. (SRT)23 Comments
Omar A. Samalot profile picture
Omar A. Samalot


  • Many positive events have happened, in the face of adversity, since my last report in Dec 2019, yet the stock price is at the same level it was back then.
  • COVID posed a real threat to the company, but this management team took the bull by its horns forcing a business transformation to survive. Survival led to innovation.
  • Sheer resilience, determination and forced innovation turned one of the most challenging years in the company's history into a story of success and accomplishment.
  • I believe we will see further evidence of this continued success when they report Q4'2020 earnings next Monday, March 15, 2021; and throughout 2021 as some business normalcy returns.

For those of you new to the story:

Startek (NYSE:SRT) is a leading global provider of technology-enabled business process management solutions. The Company provides omni-channel customer experience, digital transformation and technology services to some of the finest brands globally. Startek is committed to impacting clients’ business outcomes by focusing on enhancing customer experience and digital enablement across all touch points and channels. Startek has more than 40,000 CX experts globally spread across 46 delivery campuses in 13 countries. The Company services over 250 clients across a range of industries such as Banking and Financial Services, Insurance, Technology, Telecom, Healthcare, Travel & Hospitality, Consumer Goods, Retail, and Energy & Utilities. The Company offers a repository of digital and omnichannel solutions based on decades of experience in driving growth by putting the customer at the center of our business. Because no one solution fits all, we have crafted solution delivery to suit a variety of industries. Startek has delivery campuses across India, United States, Malaysia, Philippines, Australia, South Africa, Canada, Honduras, Jamaica, Kingdom of Saudi Arabia, Argentina, Peru and Sri Lanka. - Source: Startek

How COVID took the wind out of their sails

As I described in my last write-up, while 2019 was coming to an end, Startek was showing clear evidence of returning to revenue growth with higher AEBITDA margins, resulting in solidly positive cash flow from operations and net debt reduction. The company was positioned to build upon enormous momentum coming out of Q4'2019 into Q1'2020, but as the pandemic made its way throughout the globe, the last two weeks of March dragged it down. By this time, the company was also very close to achieving a significant milestone it had been targeting since the merger: the refinancing of its bank term loan once it was able to show improved results proving that the merger actually worked (more on

2020 Revenue             2021 Revenue             2022 Revenue

This article was written by

Omar A. Samalot profile picture
I am an independent financial analyst focusing on value-oriented investment opportunities, turnarounds, and special situations in the stock market. My background is in international banking with over 20 years of financial analysis experience. My research reports are based on detailed balance sheet, income statement and cash flow analysis. I gather information for these reports through extensive due diligence of all available public information, such as: SEC filings, company conference calls, investor presentations, meetings with management, competitor and industry analysis, and other research methods. You may ask why you only see just a handful of names at a time. Simple, my approach to investing follows the theory that you only need one or two good ideas a year. And when I do find the right opportunity, I ride it for all it's got until my theory is no longer applicable. I rather invest in just a handful of companies I know really well, than have a portfolio of 15 that I can barely keep up with. I only write reports on those companies I currently follow and have a position in. Readers should assume I own equity or debt securities on every company I cover, unless otherwise disclosed in the report.

Analyst’s Disclosure: I am/we are long SRT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (23)

Dayton Investing profile picture
Well, blow out quarter all around. Helped by some government COVID love but it looks like they are growing in all areas of the business as well.
Omar A. Samalot profile picture
@Dayton Investing Agreed 100%. CEO very bullish on the call and said the current stock price does not reflect what they see going forward.
@Omar A. Samalot ---- Omar are you still doing work on SRT ?
Omar A. Samalot profile picture
@dmolnar83 Not currently, but I still follow the story. Very disappointing to see the stock level and current management drama despite great AEBITDA achievement over last 12 months.

I do think a transaction happens but much higher than $5.40. The Company would see too many minority shareholder lawsuits at that price level.
Omar A. Samalot profile picture
It seems at least the CEO agrees with me....

Doesn’t SRT have a conditional arrangement with Amazon? Now that AWS and Dish are partnered could that help SRT?
Omar A. Samalot profile picture
@jimbohard8 Yes, as revenue with Amazon surpasses periodical benchmarks, SRT issues warrants to Amazon. Any business Amazon gets into that is within SRT's core competencies is an opportunity for SRT, but not a guarantee. Amazon will choose the right provider for the right reason.
Here are my ideas as to why Startek is down even after record quarterly results.

1. Startek is in the Russell index. Morgan Stanley downgraded small-caps this week, saying the risk-reward is less compelling after the Russell 2000 has outperformed the S&P 500 by 50% and even the Nasdaq 100 by 40% since April.

2. I wonder if the fact CSP owns 55% of the company keeps other big investors away.

3. Managements refusal to give revenue guidance or earnings estimates for years, even after being repeatedly asked by Omar. They have been talking about profitable growth for years.

4. Managements hesitancy to give metrics like seat count and capacity usage rates. I understand not wanting to overpromise and under deliver, but I think a balance needs to be had.

These are some possible reasons, but who really knows. I’m a shareholder and still believe in the thesis, but this company is trying my patience.
alico profile picture
Hi Omar, nice article, but i see that you keep giving your "very bullish" opinion about this company since 2 years but there is still not a big change on their share prices. What do you expect in terms of timing for the investors to see some results?
Omar A. Samalot profile picture
@alico good question...I have to say I'm baffled with the stock action. Record results for Q4'20 beyond my expectations and the stock is down. Given their results, cost structure, and commentary, achieving $75m to $80m in AEBITDA for 2021 is now a base case scenario, in my view. Using a multiple of just 8x (below peers), yields a $14 stock. This should be trading around $11 to $12 today! Why is it not? Your guess is as good as mine...it is a head scratcher to me.
bazooooka profile picture
@Omar A. Samalot i'd take four bucks at this point
Omar A. Samalot profile picture
@bazooooka lol who can blame you
B Riley just upped Startek price target to 12. Reiterated BUY.
Omar A. Samalot profile picture
here are some more positive news:
Nice article. I agree 2020 was a tough year. But as you clearly explained they seem to be in a better spot now with more improvement to come. I hope they give some forward looking guidance Monday. Thanks
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