5-Star Stocks Poised to Pop: CDC Software

Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, business software specialist CDC Software (Nasdaq: CDCS  ) has earned a coveted five-star ranking.

With that in mind, let's take a closer look at CDC's business and see what CAPS investors are saying about the stock right now.

CDC facts

Headquarters (Founded) Central, Hong Kong
Market Cap $227.9 million
Industry Application software
Trailing-12-Month Revenue $206.06 million
Management CEO Peter Hak Yung Yip (since 2009)
CFO Stephen Dexter (since 2010)
Trailing-12-Month Return on Equity 7.4%
Cash/Debt $29.9 million / $19.3 million
Competitors Microsoft (Nasdaq: MSFT  )
Oracle (Nasdaq: ORCL  )
salesforce.com (NYSE: CRM  )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 98% of the 232 members who have rated CDC believe the stock will outperform the S&P 500 going forward. These bulls include irishred1 and All-Star TSIF, who is ranked in the top 0.5% of our community.

Late last month, irishred1 tapped CDC as particularly cheap way to go for growth: "Purely a value pick as this is a growing company selling at a bargain basement price."

Despite having the unenviable task of battling enterprise software behemoths, many Fools think CDC is simply too cheap to ignore. The CDC (Nasdaq: CHINA  ) subsidiary currently sports a PEG ratio of 0.4, representing a massive discount to giant rivals Microsoft (1.05), Oracle (0.98), and Salesforce (3.2). Of course, if CDC's offerings are as decent as CAPS All-Star TSIF thinks, that wide valuation gap should only close over time:

This software faces steep competition, but generally client loyalty is high as the cost to change vendors can be high in dollars, down time, and training. ... Margins are moderate, but with licensing it's the cash flow that's important. CDC is trading near book value which is rare for a software company and is growing customer base. It's forward P/E is sub 7. CDC is also growing it's portfolio through acquisitions. ...

I think CDC, Hong Kong or not, has the makings of strong growth company. Competition, rate of new customer sign-ups, reasonable acquisitions, etc, all need to be monitored, but for now CDC is a promising company that appears to be undervalued.

What do you think about CDC, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Salesforce is a recommendation of Rule Breakers. Microsoft is an Inside Value pick, and Motley Fool Options has recommended a diagonal call position on it. The Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Fool's disclosure policy always gets a perfect score.


Read/Post Comments (3) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 03, 2010, at 9:29 PM, jlanganki wrote:

    CDC Corporation owns 85% of CDC Software. The market value of CDC Corporation is less than the value of their stake in CDC Software, and CDC Software represents only 60% of their revenue. You're better off with buying CDC Corporation which plans on distributing shares in CDC Software as a dividend in the future.

  • Report this Comment On December 06, 2010, at 8:00 PM, jlanganki wrote:

    Go ahead and call Sunshine Mills at 1-800-633-3349 to express your displeasure that they are stealing money from working Americans. What a joke. This judgment will obviously not stand up in appeal.

  • Report this Comment On December 06, 2010, at 8:19 PM, jlanganki wrote:

    Similarly, you can contact the law firm to give them your opinions (http://mcdowellbeason.lawoffice.com/)

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