Lexmark trades for only about 10X forward earnings, even after the nearly 10% pop in its share price today. Lexmark is producing prodigious cash flow, and its 2Q free cash flow of $48 million allows the company to pay fat dividends and buy back shares. The CEO reiterated that Lexmark intends to return at least 50% of its free cash flow to shareholders via dividends and share buybacks. I'm not getting off this bus!
Lexmark continues to transition out of its low margin ink jet printer business into higher margin managed print services and software. It has been successful at maintaining its margins during the transition by carefully managing costs. It appears the string of software acquisitions, including Perceptive Software, is enabling Lexmark to succeed in managed print services, and to enter higher margin niches, like unstructured data. The CEO seems to be executing on his transition plan without missing a beat!