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Concentrix Stock: A Hidden Gem To Consider Buying On The Pullback

Jan. 11, 2022 9:43 AM ETConcentrix Corporation (CNXC) Stock35 Comments
Edward J. Roche profile picture
Edward J. Roche


  • Concentrix is a hidden gem covered by a few analysts.
  • The company has demonstrated strong earnings growth since its spin-off from SYNNEX.
  • The stock is selling at an excellent valuation. The stock price could rise 30% over the next year in my view.
Customer Experience Drawn on Blue Wall.

Tashatuvango/iStock via Getty Images

I laid out the case for Concentrix (NASDAQ:CNXC) in my article on 12/2020. At that time the company had just been spun off from SYNNEX (SNX). My analysis showed what appeared to be a rapidly growing

This article was written by

Edward J. Roche profile picture
Edward Roche is the President of Freedom Mountain Investments (http://www.freedommount.com/), an investment firm founded in 2006, located in Paoli, Pennsylvania. Freedom Mountain specializes in identifying hidden value in small and mid size companies before they are recognized by the market. The investment approach is based upon fundamental analysis and places a high emphasis on real and rising financials including sales and earnings. One special approach used to identify a catalyst for release of value is the “Venerable Owner” strategy. This strategy tracks all companies where an older owner owns 40% or more of a company. These situations often lead to sale of the company at a significant premium to market value when the owner seeks to retire. Edward Roche received a Ph. D. degree in Polymer Science and Engineering from the University of Massachusetts and earned an MBA in Finance from the Haub School of Business, St. Joseph’s University, Philadelphia PA. He recently completed a career at the McNeil division of Johnson & Johnson that included high level positions in Business Development and R&D. He is the inventor on 15 US patents in the area of drug delivery and has authored ten scientific publications.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of CNXC either through stock ownership, options, or other derivatives. 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.

I own stock in Concentrix in personal account and in account managed for Freedom Mountain Investment clients. I have added some shares on 1/9/22 and may add more at attractive prices.

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 (35)

whitehead1 profile picture
Has it pulled back enough at 75?
Alligator sunk profile picture
Where would I look to find if Teleperformance TLPFF has Noncontrolling Interest (NCI) in Concentrix CNXC?
Edward J. Roche profile picture
@Alligator sunk Such ownership would normally show up in the Definitive Proxy filings. But I see nothing like that. It appears that Teleperformance is another significant company in the call center space competing with CNXC.
Alligator sunk profile picture
@Edward J. Roche how do I locate Concentrix stock portfolio, operating agreement, and financial protection statement?
Edward J. Roche profile picture
Another strong quarter. Results just out:

@Edward J. Roche Stock dropped like a rock today, don't understand why. The trading on Concentrix is puzzling
Edward J. Roche profile picture
@wurner I added. Thinly traded stock. Very volatile. Take advantage of nonsense price swings. p/e only 16 .
@Edward J. Roche
Great article Edward. I can’t find anything in yesterday’s earnings report that would be a cause for concern to justify the steep sell off today. I agree that CNXC is a thinly traded and volatile stock which usually bounces back strong. Do you see anything is this new earnings report that is a cause for concern? Thanks.
Good call. One of the better tech charts out there.
Damon Judd profile picture
Just stumbled upon this ticker. Nice write up and SA Quant ratings agree with you as this ticker is #1 in the sector. I need to look into this one more closely.
Edward J. Roche profile picture
@EnigmaDude Still very under known and under followed (analysts).
WoW! CNXC went from $164 to $200 in a jiffy ie 5 days to a new high. Never understood why it went down to $164 or lower, but any concerns are put aside for now.
Edward J. Roche profile picture
@wurner Up over 17% since I wrote this article. It is somewhat thinly traded and volatile. The strong earnings report helped a lot.
Appreciate the info. But it lacks the company's competitive advantage or competitor analysis which is one of the top most important factors to decide a company's long term stock price.
Edward J. Roche profile picture
@oneview I can provide a more detailed analysis of that at some point. Per the last earnings conference call they are saying that they are taking market share and growing faster than the CX market as a whole. The recent PK acquisition expands their offerings. Their strong list of existing client relationships (detailed in my article) gives them a strong moat. They compete against a number of large and mid size competitors such as Accenture, Cognizant etc. CNXC place a greater focus on CX than most of these. CNXC stock has held up well in the recent market downturn after the strong earnings report.
Edward J. Roche profile picture
Just out after the close:

Concentrix Poised for Market Share Gains After Strong Q4, Upbeat Guidance, Barrington Says

04:11 PM EST, 01/20/2022 (MT Newswires) -- Concentrix(CNXC) exceeded the Street's Q4 earnings estimates and provided unexpectedly strong Q1 and full-year fiscal 2022 guidance as the provider of customer experience management services used strong demand and recent technology investments to grow its client roster, Barrington Research said in a note Thursday.

The "solid close to the year and strong new business signings give management confidence in the company's ability to grow faster than the market in fiscal 2022," Barrington said.

Analyst Vincent Colicchio raised his full-year fiscal 2022 non-GAAP EPS estimate for Concentrix(CNXC) to $12.20 from $10.52, citing better-than-expected adjusted operating margin trends and accretion from the recent acquisition of PK, a provider of digital design services.

Barrington reiterated an outperform rating on Concentrix(CNXC) and a $202 share price target.

Shares climbed 1.8% to $172.19 Thursday.
Value Alpha profile picture
Your thoughts on the valuation they paid for PK? Marker comps seem to have dropped for some of these digital assets since the acquisition was announced.
Edward J. Roche profile picture
@Value Alpha It seems to be working out fine per the cc and is immediately accretive.
Edward J. Roche profile picture
This just out from Spruce Point:

"Spruce Point Capital Management Announces Investment Opinion: Releases Report and Strong Sell Research Opinion on TaskUs, Inc.

We estimate 25% – 50% downside risk to TaskUs’ share price and believe investing in Concentrix Corp(CNXC) and Majorel Group are better ways to gain exposure to the technology BPO sector. Analysts are unanimously bullish on TaskUs with “buy" or “overweight” recommendations, but we believe they have not conducted a rigorous forensic review that would unearth the growing financial strains we have observed. TaskUs is currently trading on the expectation of 27% sales growth in 2022 and 25% long-term EBITDA margins. TaskUs also trades at a premium to industry peers at 4.4x and 20x 2022E sales and EBITDA. However, our research indicates TaskUs'(TASK) ability to increase margins without the kind of differentiated product offering increasingly being marketed by competitors will be challenged. Instead, we favor Concentrix Corp(CNXC) , a recent spinoff, and Majorel Group (AMS: MAJ), a recent European IPO. Both companies provide similar exposure to the high growth technology outsourcing market with lower customer concentration risk and compelling capital return policies. While both are projected to grow revenues by low double digits, these stocks trade at an undeserved discount of approximately 1.5x and 9.5x 2022E sales and EBITDA. As a result, we estimate a minimum of 20% and 35% upside to Concentrix Corp(CNXC) and Majorel Group, respectively. "

TASK down about 19% on this news.

CNXC trading down a bit this morning for no reason that I know. Another chance to add.
Edward J. Roche profile picture
Listened to the cc. Everything I heard was positive. Growth above market. PK acquisition looking good. Taking some market share. Growth in a number of different markets.
Edward J. Roche profile picture
Another solid beat out tonight. Stock up nicely in after hours/
Edward J. Roche profile picture
Results just out. Looks like another solid beat. Stock up in after hours.

Q4 earnings of 2.99 0.28 better than analyst estimates. Rev guidance for 2022 of $6.45-6.6 B vs. consensus of $6.16 B.
@Edward J. Roche Appreciate your analysis. Looking at the total non GAP earnings for the year of 10.15, its trailing PE iis in 17 range. Seems incredibly cheap to me, but it always seemed cheap, now its cheaper.
Edward J. Roche profile picture
@wurner Very cheap given the nice growth. Continues to be underfollowed and underowned. I will listen the cc tomorrow.

Could be an acquisition target.
Thanks for the review. It is hard to find info on Concentrix. Own a few shares, but wish I understood the concept of CX better and thereby Concentrix growth potential for this type of business. I have been to their website. I guess I will need to go back and read up on it some more. Beyond that the financial reports for the first 3 quarters are impressive and if they meet the expectations in this last quarter the stock could easily go up by 30%.. However one thing that does bother me is that the stock seems very volatile and can decline suddenly without apparent explanation, which occurred last Friday.
Edward J. Roche profile picture
@wurner The sudden drops are good opportunities to add if you believe in the long term story.
Edward J. Roche profile picture
@wurner Some more links to read about the importance of Customer Experience:



The second is from Accenture, a competitor.
Edward J. Roche profile picture
@wurner and more from another competitor: Cognizant

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