Tuesday, May 30, 2006

Stock # 8 - Agilysys

Agilysys (AGYS) – I have to admit that I love the made up names of companies. I just picture a company going to an ad agency and saying, “we need a new name that will invoke the image that we want to invoke.” Like Genetech, I guess it is a blend of Genetics and Technology. Microstrategy would be another example. I suppose Agilysys connotes Agile Systems, I don’t know. Of course the other trend is to shorten everything. Burger King becomes “BK”, Kentucky Fried Chicken is “KFC” and Minnesota Mining and Manufacturing becomes “3M”.

I read the profile and Agilysys kind of sounds like a mini-IBM. They create computer solutions. They do some consulting. They sell hardware and software. It does seem like their customer is businesses. Right now I do prefer the customer to be a business than a consumer as I think consumers are getting tapped out with higher gas prices and the housing market having peaked along with interest rates rising.

AGYS just reported earnings last week. I love the summary from the chairman. Do these guys just speak off the cuff or is it scripted?

Arthur Rhein, chairman, president and chief executive officer of Agilysys, said, "I am extremely pleased with the fourth-quarter and full-year results we reported today. Our highly-skilled and motivated people continue to dedicate themselves to providing customers more complete enterprise computer technology solutions and our focus on higher-value is evident in our performance."

Let’s look at some key facts:

  • Almost 11% Y o Y growth this quarter.
  • Gross Margin increased from 12.5% to 13.9% as Software sales (higher margin) were increasing faster.
  • They expect to grow 6% to 8% in Fiscal 2007.
  • Stock Price is $16.77 with a 52-week range of $13.02 to $21.25.
  • Market Cap is $512m.
  • Earning Yield is (per MFI): 14%
  • Return on Capital is 50% to 75%
  • Current Ratio is 1.31 with most of it being accounts payable.

I don’t know, I am having trouble getting too pumped up with Agilysis. I don’t see where the have any competitive advantages or pricing power. To me they look pretty fairly priced.

On deck: King Pharmaceutical.

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