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Author: schuured One star, 50 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1640  
Subject: Great googly, Batman, another stock! Date: 3/17/2009 1:34 PM
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Good morning fellow stinkers. I have been trolling the depths of CAPSdom in search of another offering. Having thus returned from my quest, I hereby present Sykes Enterprises, Inc (SYKE):

Sykes bills itself as a company which offers "customer contact management solutions". Really, it's a customer service provider. Through various media (telephone, web, fax) it provides customer services for Fortune 1000 companies worldwide. In general, a poor economy has done little to damage their business, and many sectors are increasing their customer service departments to grab market share. This, clearly, benefits Sykes.

There are many things I like about Sykes, so let me spew forth the numbers (from Yahoo!).

Mkt Cap: $616 Million
P/E: about 10
PEG: 0.85
ROE: 16%

From the Income Statement:
Sales have been stable for the past 3 Quarters - neither up, nor down; but annual growth has been strong and increasing for the past 3 years: 6% from '04-05, 14% from 05-06, and 19% from 06-07.

Balance Sheet looks similarly good with cash on hand increasing quarter over quarter, with no debt!

Haven't really chewed on the cash flow yet, but I'm getting there.

SYKE is highly rated in CAPS with five stars, but I really don't recognize any of the top players. On the other hand, no notable red thumbs, either.

Inside ownership is strong with a total of about 16% of shares outstanding in the hands of "insiders." About 12% is held by the namesake, founder and CEO John Sykes with about 5.7 million shares.

In summary, I see a (relatively) small company with stable income and a proven track record of growth who is positioned well to weather this economic downturn and perhaps even profit from it. It appears well managed, with high insider ownership, a rock-solid balance sheet and what appears to be an attractive entry point. I'm sure, however, that I've missed something.

So, have at me.....

Ed
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Author: Tastylunch Three stars, 500 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 826 of 1640
Subject: Re: Great googly, Batman, another stock! Date: 3/17/2009 3:27 PM
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You know Ed I like this pick.there's a couple hiccups that probbaly need to be looked into before taking a position
They do have a recent semi-major red flag from their last quarter
http://finance.yahoo.com/news/Sykes-Enterprises-4Q-profit-ap...
Sounds like they took a hit earnings wise and lost a big court case
The thing to really find about is whether that Tax issue is going to be ongoing.

But this sort of blah earnings is true for just about everybody lately. I might wish to wait a quarter to see if this becomes a pattern or if it's a one time deal.

They are little pricey Price/Book wise but since they are still in their grow phase I don't think that's a deal breaker

The one thing I don't know is how their line of business works very well. I would think it would remain in demand in this economy for sales leads would remain stable. But for me personally I'll have to learn about it before investing. Their line of work has a thin operating margin so I'd want to have a better grip on the risks before getting in. My guess is they will be fine for sales.

Unfortunately the technicals look fairly bad, it's in a well defined down channel and it's way below the moving averages. So timing wise if you are into that you might be able to pick a better spot.

excellent suggestion Ed , this one looks like it could be one that could have a lot of promise. Might be a great one to keep ondeck but not go long on just yet.

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Author: schuured One star, 50 posts CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 827 of 1640
Subject: Re: Great googly, Batman, another stock! Date: 3/18/2009 6:52 AM
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Good thoughts, tasty. I agree with your concern over the tax issue. I read through their 10-K (just released 3/10) last night. Even after reading it three times, I don't fully understand the tax issue. Apparently the German Supreme Court overturned a lower court ruling about a certain tax advantaged status Sykes was using. It sounds like the ruling would lead to ongoing increased taxes in Germany. Not sure.

The Q4 profit dip is a bit concerning, but is largely due to non-recurring items. It would make sense to watch them for another quarter or two before jumping in with RL money. I haven't yet gotten into TA, but it makes sense as a means of optimizing your purchase points. If TA could keep me from buying into an non-performing asset, all the better.

Also, I have a correction: The founder and beneficial owner, John Sykes, is now retired from the company. His son, Charles, is the CEO. It is John who owns about 12% stake in the company.

Hope you all have a great day.

Ed

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Author: Tastylunch Three stars, 500 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 839 of 1640
Subject: Re: Great googly, Batman, another stock! Date: 3/19/2009 1:34 AM
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Hmmm sounds like the tax issue definitely needs to be explored then.
That's the problem with dealing with business that do a lot of business sin europe very arbitrary rules over there,

thanks for the followup Ed

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Author: StockSpreadsheet Two stars, 250 posts 10+ Year Anniversary! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 847 of 1640
Subject: Re: Great googly, Batman, another stock! Date: 3/19/2009 6:58 PM
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Ed,

At first glance the stock seems pretty good. Annual sales growth on average of 10% since 2002. Annual EPS growth on average of 26% since 2001. Love the "No debt" part. P/E of about 11 is pretty good too. Profit margin and ROE dropped in 2007 but with the sales and EPS rises in 2008, that should be reversed. (My software doesn't pull up official numbers from 2008 yet, (probably will in another week or so as it does show unofficial numbers for 2008 right now), so I don't know if those numbers have been reversed right now.)

I get a PEG of about 0.54, so that number is very good.

Like the stock from what I see. Bummer that it doesn't pay a dividend though. Worth further investigation on my part. Seems like a good pick. Good choice.


Craig

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