Pc Connection Inc (NASDAQ: CNXN)

Sector: Technology Industry: Electronics & Computer Distribution CIK: 0001050377
Market Cap 1.63 Bn
P/B 2.23
P/E 18.18
P/S 0.51
ROIC (Qtr) 8.01
Div Yield % 1.84
Rev 1y % (Qtr) -2.16
Total Debt (Qtr) 437,000.00
Debt/Equity (Qtr) 0.00
Add ratio to table...

About

PC Connection Inc., a Fortune 1000 Global Solutions Provider, operates in the information technology (IT) industry, providing a range of solutions that simplify the IT customer experience. The company's main business activities revolve around designing, deploying, and supporting cutting-edge IT environments for a diverse range of organizations across various industries. PC Connection operates in three key segments: Enterprise Solutions, Business Solutions, and Public Sector Solutions, serving large enterprise customers, small to medium-sized businesses,...

Read more

Investment thesis

Bull case

  • Strong operating cash flow of 63.27M provides robust 144.78x coverage of total debt 437000, indicating excellent debt servicing capability and financial flexibility.
  • Strong tangible asset base of 1.23B provides 2816.07x coverage of total debt 437000, indicating robust asset backing and low credit risk.
  • Robust free cash flow of 55.71M exceeds capital expenditure of 7.56M by 7.37x, indicating strong organic growth funding capability.
  • Retained earnings of 888.96M provide full 2034.23x coverage of long-term debt 437000, indicating strong internal capital position.
  • Short-term investments of 211.35M provide solid 2.97x coverage of other current liabilities 71.28M, indicating strong liquidity.

Bear case

  • Operating cash flow of 63.27M provides thin coverage of dividend payments of (14.15M) with a -4.47 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • High receivables of 616.70M relative to inventory of 135.02M (4.57 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Operating cash flow of 63.27M is outpaced by equity issuance of (68.98M) (-0.92 ratio), indicating concerning reliance on equity markets for funding operations.
  • Tax assets of 0 provide limited offset against tax liabilities of 18.25M, which is 0x, indicating potential future cash flow pressure from tax obligations.
  • R&D investment of 0 represents just 0x of SG&A expenses of 432.24M, indicating potential underinvestment in innovation relative to administrative overhead.

Segments Breakdown of Revenue (2024)

Peer comparison

Companies in the Electronics & Computer Distribution
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 ARW Arrow Electronics, Inc. 7.91 Bn 13.85 0.26 3.09 Bn
2 SNX Td Synnex Corp 6.38 Bn 23.20 0.33 4.61 Bn
3 AVT Avnet Inc 5.42 Bn 26.12 0.23 3.17 Bn
4 NSIT Insight Enterprises Inc 2.61 Bn 16.60 0.32 1.36 Bn
5 CNXN Pc Connection Inc 1.63 Bn 18.18 0.51 0.00 Bn
6 SCSC Scansource, Inc. 0.82 Bn 11.15 0.27 0.10 Bn
7 CLMB Climb Global Solutions, Inc. 0.51 Bn 80.43 1.89 0.00 Bn
8 IZM ICZOOM Group Inc. 0.01 Bn 10.40 0.07 -

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.20 0.78
EV to Cash from Ops. EV/CFO 89.39 117.90
EV to Debt EV to Debt 3,587.57 438.44
EV to EBIT EV/EBIT 12.69 15.47
EV to EBITDA EV/EBITDA 11.57 13.22
EV to Free Cash Flow [EV/FCF] EV/FCF 213.24 113.72
EV to Market Cap EV to Market Cap 0.96 1.17
EV to Revenue EV/Rev 0.49 0.54
Price to Book Value [P/B] P/B 2.23 2.70
Price to Earnings [P/E] P/E 18.18 21.87
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 5.92 2.26
Dividend Payout Ratio % Div Payout % (Qtr) 16.80 11.51
Dividend per Basic Share Div per Share (Qtr) 0.55 0.49
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 25.03 10.45
Interest Coverage Int. cover (Qtr) 0.00 -0.62
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -1.42 9.50
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 12.14 97.84
Dividend Growth (1y) % Div 1y % (Qtr) 44.74 6.75
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -7.12 -1,335.47
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -4.37 -783.61
EBIT Growth (1y) % EBIT 1y % (Qtr) -6.84 -8,097.95
EBT Growth (1y) % EBT 1y % (Qtr) -6.84 -8,103.00
EPS Growth (1y) % EPS 1y % (Qtr) -4.66 22.53
FCF Growth (1y) % FCF 1y % (Qtr) -63.70 -1,628.21
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 2.64 3.71
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 2.21 2.10
Cash Payout Ratio Cash Payout (Qtr) 0.20 0.07
Cash Ratio Cash Ratio (Qtr) 0.49 0.63
Current Ratio Curr Ratio (Qtr) 3.06 2.37
Debt to Equity Ratio Debt/Equity (Qtr) 0.00 0.40
Interest Cover Ratio Int Coverage (Qtr) 0.00 -0.62
Times Interest Earned Times Interest Earned (Qtr) 0.00 -0.62
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 4.40 0.27
EBIT Margin % EBIT Margin % (Qtr) 3.96 -0.41
EBT Margin % EBT Margin % (Qtr) 3.96 -0.82
Gross Margin % Gross Margin % (Qtr) 18.50 12.10
Net Profit Margin % Net Margin % (Qtr) 2.90 -1.39