ASGN - Embedded Expectations Analysis - 2020 05 20
ASGN Incorporated (ASGN:USA) currently trades below recent averages relative to UAFRS-based (Uniform) earnings, with a 12.6x Uniform P/E, implying bearish expectations for the firm. Although management's concerns about adjusted EBITDA, margins, and their acquisitions suggest the potential for near-term headwinds, market expectations remain far too bearish, and longer-term equity outperformance remains warrantedSpecifically, management may lack confidence in their ability to sustain adjusted EBITDA increases, consulting segment margin outperformance, and gross margin strength. Furthermore, they may be downplaying concerns about the impact of coronavirus on their ECS revenue and backlog, and they may have concerns about their large and federal government account mix and potential price concessions due to higher unemployment. In addition, they may be overstating the benefits of their strategic initiatives, their robust pipeline's ability to afford further strategic acquisitions, and the potential of their end-customer solution acquisitions
Although management's concerns about adjusted EBITDA, margins, and acquisitions suggest the potential for near-term headwinds, given the strong secular growth drivers surrounding the firm's position in high technology industries, market expectations remain far too bearish, and longer-term equity outperformance remains warranted for ASGN
ASGN provides information technology (IT) and other services in the technology, digital, creative, engineering and life sciences fields across commercial and government sectors. The company's segments are: Apex, which provides technical, digital, creative, scientific and engineering personnel for contract, contract-to-hire, and permanent placement positions to clients across the United States and Canada; Oxford, which provides staffing and permanent placement services in select skill and geographic markets in the United States and Europe; and ECS, which delivers solutions in cloud, cybersecurity, artificial intelligence, machine learning, application and IT modernization, science and engineering.
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