Data services company Acxiom
The buyback
Acxiom's board of directors approved the buyback, which will be carried out over the next 12 months. For a company with a market cap of around $850 million, the repurchase certainly is substantial. Let's delve a little deeper, first seeing how Acxiom is placed financially and then how the market values its stock.
Where's the money?
Acxiom's free cash flow has declined by about a third in the past year, to $119.3 million. The company has been reducing its debt load, cutting long-term debt by more than $100 million since last year. A high EBITDA interest coverage ratio of 10.3 and a current ratio of 2.0 indicate the company is well-placed to pay off its debt and interest payments. The company shouldn't have any real issues in paying off its short-term obligations and funding the buyback.
What's its value?
Acxiom may be able to afford this move, but the important question is this: Does the buyback make sense? Let's take a look at how the company is valued when compared to industry peers.
|
Company |
Trailing P/E |
Forward P/E |
Total Enterprise Value-to-Free Cash Flow Ratio |
|---|---|---|---|
| Acxiom | NM | 13.58 | 8.84 |
|
Responsys |
70.38 | 81.49 | 44.84 |
|
Xerox |
11.55 | 7.06 | 11.91 |
|
Global Payments |
16.98 | 14.35 | 5.79 |
Source: Capital IQ, a division of Standard & Poor's; NM = not meaningful.
Acxiom's P/E is not meaningful since the company has been reporting losses, but those resulted largely from one-time writedowns. On the basis of forward P/E, as well as enterprise value-to-free cash flow ratios, Acxiom isn't the most expensive stock in the list. And considering the stock's 40% year-to-date loss, the buyback doesn't look like the worst option as management looks to support the value of the shares.
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