RE:RE:RE:P/e$19 million cash flow from operating activities before changes in working capital less $1.5 million of cash taxes paid. That equates to ~$17.5 million of cash flows on an after-tax basis. I am ignoring sustaining capital expenditures for now as they are rather nominal (typically) for software firms.
My understanding is that seasonality does not influence ESL's business. Therefore, if we annualize Q1's performance, i.e., $17.5 million cash flow x 4, we arrive at $70 million cash flow on an annualized run rate excluding the two recent acquisitions.
$1.35 billion market cap. less $100 million cash = $1.25 billion enterprise value. $1.250 billion enterprise value / $70 million cash flow = 17.86x trailing cash flows, or about 18x.
ESL grows at 15-20% per annum, however, I like to be conservative, so if we go with the lower end of that range, we can assume they generate $80 million cash flow (which seems pretttttttttty realistic given that they just consummated two transactions), $1.250 billion / $80 million = 15.6x forward earnings, or about 16x.
Companies that grow 10-20% per annum that trade at 16x are cheap. Especially when they are in a sector with headwinds at its back (ie, software).
I already own a pretty substantial position in ESL (picked it up at $34.50 a bit over a year and a half ago), it's about 6% of my portfolio. Honestly I think today's price is a pretty fair price to acquire more shares, but I doubt I will be picking up any as there are some other companies that are slightly more attractively priced that I think are undervalued. But if you own a small position in ESL or you don't have one, today's price seems "fair". Don't get me wrong, it can go down further, especially if the market turns ugly, but if we trade flat or even nominally upwards I wouldn't be surprised to see this thing close to $60 in the coming months.
Cheers