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Datalink Offers Good Value Entry Into Cloud Sector

|Includes: Datalink Corporation (DTLK)

After an unspectacular quarter with a decrease in unit sales revenue YoY DataLink (NASDAQ:DTLK) offers a compelling valuation entry into the cloud computing sector, which is projected to grow at a large clip in the next 10 years. Service Sales grew at a significant clip and may continue to gain momentum, so when unit sales pop up again, by macro forces or by sheer sales force determination, the stage will be set for a significant increase in share price.

At a market capitalization of 206 million as of May 12th DataLink has 71.6 million in cash and no long term debt and a projected 5-year EPS growth rate of 20%. 2014 numbers may underwhelm the street and may not reach the consensus 91 cents EPS that was initially projected. That being said, DataLink is clearly a value stock at this moment in time, offering a margin of safety in a lofty market with good prospects in the coming years.

If DataLink can be earning $1.30 a year within 5 years and continues to build it's cash reserves I would estimate the fair value of this stock to be around $19-$21, which makes the recent pullback an opportunity as far as I'm concerned.

DTLK Chart

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