Perficient Stock: If This Happens, Investors Could Have 50% Upside

 Perficient stock
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Perficient Missed the Party But It’s Not Too Late

The risk on trade made a grand comeback in September, with the Russell 2000 charging ahead six percent, easily outperforming the S&P 500 and the NASDAQ.

But, while the indexes appear to be bursting higher, there are many stocks that have not followed in the excitement, including small-cap technology play Perficient, Inc. (NASDAQ:PRFT).

Perficient has been in a “show me” situation for the majority of the past decade, but it offers investors a decent risk-to-reward contrarian trade.

The company seems to be in the right space, developing digital technology solutions that are aimed at helping Global 2000 companies with their digital solutions.

PRFT stock is included in both the Russell 2000 and the S&P SmallCap 600 indexes, which means it has institutional support, despite its failure to ramp higher.

Compared to the S&P 500 and Russell 2000, Perficient stock has underperformed, with a tiny 0.05% move over the last year. However, it is rallying of late, with a 13.66% year-to-date move to a 52-week high of $19.90 on Thursday.

The rally doesn’t imply that the coast is clear for Perficient stock, as evidenced by the chart over the past five and 10 years, when the stock only traded as high as $24.75 in October 2007.

Chart courtesy of StockCharts.com

The two-year chart of PRFT stock shows a bullish rounding bottom with a targeted move towards $22.00.

The daily chart points to the emergence of a bullish golden cross in late July at around $18.00 on a rising relative strength indicator (RSI) and moving average convergence/divergence (MACD). The technical outlook looks encouraging, but we have been disappointed in the past.

Chart courtesy of StockCharts.com

Fundamentals Improving for PRFT Stock

Revenues have risen in three consecutive years from $373.33 million in 2013 to $486.98 million in 2016. The compound annual growth rate (CAGR) was 9.8% during this span.

The positive trend for Perficient is expected to continue, but at a lower rate than the CAGR. The expected revenue growth is a mere 1.5% this year, but it could be as high as 9.7% in 2018 should Perficient manage to meet its high estimate at around $543.0 million. (Source: “Perficient, Inc. (PRFT),” Yahoo! Finance, last accessed October 5, 2017.)

The earnings picture is positive, but it has been largely flat and deprived of any meaningful growth. That said, things are looking brighter.

Earnings growth is estimated at 13.9% in 2017 and 14.65% in 2018. The earnings per share (EPS) trend has been moving higher over the past 90 days, which generally coincides with a higher share price.

Analyst Take:

The fundamental and technical pictures for Perficient are positive, and suggest that things are looking up for frustrated investors who have been waiting patiently for some good news.

PRFT stock has missed out on the eight-year bull market, so hopefully it can jump on.

The forward multiple of 14 times is fairly attractive, and an improvement over the 48-times trailing multiple.

Even expanding the multiple to a reasonable 20 times could drive PRFT stock towards the $28.00–$30.00 level.