I am still long TECD and expect a $125-135 stock in 12-24 months.
Earnings were solid, tariffs had zero impact on Q2 results, and management continues to impress despite macro headwinds.
Tech Data continues to trade at a 30% discount to its peers, despite the best performance from an earnings growth and ROE perspective.
I wrote up Tech Data (TECD) last August 2018, when the stock was trading just under $85 per share. Since then, the stock is up 12.1% (vs the S&P up 4.7%). But despite the outperformance, the stock has actually gotten cheaper. A year ago, it was trading at 8.2x 2018 earnings. Today, it’s trading at an historical low valuation at 7.6x earnings (for the fiscal year ending January 2020).
Put differently, TECD likely will grow EPS at a 31% growth rate this year. And yet, it suffers at a multiple that suggests a business model either in serious secular decline or likely to see a major negative earnings drop soon. Even at the company’s trading low in late 2008 (at roughly $20 per share during the panic of the Great Recession), TECD traded at an 8.0x P/E multiple. The downside appears quite limited.
A more typical trading level is 10-14x earnings, and 5-8x EBITDA. Below is a chart of the average P/E ratio going back to 2017.
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