Shares of Synnex Corp. (SNX, Financial) surged more than 7% on Wednesday after another impressive performance in the third quarter. The company announced results on Tuesday after the market closed that beat analysts' expectations on revenue and earnings.
Shares of the company are now up about 11.77% over the last 30 days and about 115% since bottoming on March 18. This results in a net year-to-date gain of just 8.85%.
Factoring in the company's third-quarter earnings results, Synnex's trailing 12-month price-earnings ratio now stands at about 11.19. This prices the stock below the Peter Lynch earnings line of 15. At the current price of about $141.87 per share, Synnex's stock has the potential to rally toward $190 per share before the end of the year.
For reference, Synnex posted non-GAAP earnings of $4.26 per share in the fourth quarter of 2019. If you add that to the current nine-month earnings of $8.42, the cumulative earnings per share for the last four quarters (including the fiscal third quarter) is $12.68.
Highlights from recent quarter results
For the third quarter, Synnex posted non-GAAP earnings of $3.33 per share, which beat consensus estimates of $2.31 and represented a slight improvement from earnings of $3.30 per share posted in the same period last year.
The company's revenue grew to $6.47 billion, which also outperformed Wall Street's estimates of about $5.72 billion.
Cash and cash equivalents grew to $1.45 billion, up from $1.11 billion reported at the end of the fiscal second quarter. Operating cash flow was $321 million.
Synnex expects to post non-GAAP earnings of $3.68 to $3.93 per share in the fiscal fourth quarter on about $6.45 billion to $6.65 billion in revenue.
The company will be splitting into two publicly listed companies within the next three months. Concentrix will trade separately from Synnex Technology Solutions by the end of the fourth quarter.
Valuation
From a valuation perspective, shares of Synnex are currently trading at a price-earnings ratio of about 11.19. This looks compelling compared to industry peers Cisco Systems Inc.'s (CSCO, Financial) and Australian-based Dicker Data Ltd.'s (ASX:DDR, Financial) equivalents of 14.34 and 21.28.
Synnex's valuation is even more impressive when we factor in expected earnings growth for the next five years. Its PEG ratio of 0.91 easily trumps Cisco's equivalent of 2.46.
In summary, Synnex appears to be relatively cheaper than its peers based on the price-earnings ratio. It also appears to be trading below the Peter Lynch earnings line, which guides for a price-earnings ratio of 15 for a company to be considered fairly valued. As such, despite Wednesday's post-earnings spike, it looks like there is still room for Synnex's stock to run higher.
Disclosure: No positions in the stocks mentioned.
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