You may think with the AI boom this past year especially, that everything is going digital. Digital consulting, digital marketing, digital access, everyone wants to tout their digitalization. But, take a look around.
What do you see every time you go out the house, to the mall, the grocery store, even just driving down the highway? Advertisement, after advertisement, and most of them old fashioned print on paper, or on posters, or on displays of one type or another, but few digital.
ARC Document Solutions (ARC) is behind the printing of many of the ads that line everything from shopping mall walls to the latest conference you attended. ARC provides document solutions to management professionals, particularly in construction, engineering, and design type businesses.
Their services range from printing and archiving services, to the high resolution, color popping advertisements I just mentioned. Not a lot of businesses want to deal with printing services in house anymore, and ARC is there to fill the void.
While the business itself may not be sexy, the stock is trading at an attractive valuation with shares trading at 12x earnings and 10.7x projected earnings. The stock also trades at only 0.47x sales, 2.6x cash, and only 5.5x cash flow. Gross margins in the latest quarter came in at almost 36%.
And while the valuation looks low, the stock is currently able to pay out a solid 6.45% dividend yield. Commenting in the latest ARC earnings release, CEO Suri Suriyakumar stated, “Our strategic services posted healthy sales growth as new customers continued to invest in visual communications and demand for scanning came from every industry we serve.”
ARC is an A rated stock in our POWR Ratings. The company comes in with a particularly high rating on the Value component where it is also an A rated stock.
So, while it may not win awards for being on the cutting edge of technology, ARC has a business that isn’t going away anytime soon, and that management is actually growing. The company fulfills a vital service that is most commonly more efficiently done by an outsourced expert, which ARC has shown is a role it can play very well.
— Jay Soloff
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Source: Investors Alley