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EPIQ Systems (EPIQ): Zacks Rank Buy

Zacks Equity Research

EPIQ Systems Inc. (EPIQ) reported stellar second quarter 2012 results with earnings and revenue both comfortably exceeding Zacks Consensus Estimates. Earnings momentum for this year and next moved higher in response, sending this provider of managed technology for the global legal profession to a Zacks #1 Rank (Strong Buy).

Furthermore, EPIQ's dividend yield is solid at 2.37% since its Board of Directors hiked the cash dividend payout to 26 cents per share in May.

EPIQ Reports Strong Q2

On July 31, 2012, EPIQ Systems reported second quarter earnings of 21 cents per share, exceeding the Zacks Consensus Estimate by 10 cents (133.33%). Earnings grew 10.5% year over year, primarily due to strong revenue growth and margin expansion.

Revenue jumped 32.4% year over year to $98.0 million, exceeding the Zacks Consensus Estimate by $10.0 million (11.4%). The better-than-expected result was primarily driven by strong revenue growth in eDiscovery (up 10%) and Settlement Administration (up 204%).

Operating expenses as a percentage of revenue declined significantly, which drove a 330 basis point operating margin expansion in the quarter.

EPIQ Systems reiterated its earlier outlook for fiscal year 2012. Revenue is projected between $345.0 million and $355.0 million (up 32% to 36% year over year), based on double-digit year-over-year revenue growth in both eDiscovery and Settlement Administration segments. Earnings are expected between $1.00 and $1.05 per share (up 15% to 21% year over year). Non-GAAP adjusted EBITDA is seen at $100.0 million to $105.0 million for the same period.

Earnings Estimates Soar

The Zacks Consensus Estimate for 2012 has climbed 45 cents (107%) over the past 30 days to 87 cents. The Zacks Consensus Estimate for 2013 surged 32 cents (54.2%) over that time to 91 cents.


EPIQ's dividend yield of 2.31% is also noteworthy. EPIQ started paying a regular cash dividend in 2010 and since then has raised the dividend payout substantially (40% in 2011, another 30% in 2012).


EPIQ shares are currently trading at 12.6X forward earnings, a discount to the industry average of 20.8X and to the S&P 500 average of 13.8X. This indicates that the stock is undervalued.

Moreover, its PEG ratio of 1.26 is lower than the industry average of 1.51.

Kansas City-based EPIQ develops software that primarily caters to legal professionals. Its solutions help in managing bankruptcy proceedings, litigation, financial transactions and regulatory compliance matters. EPIQ has a market cap of $393.75 million and generated 92% of 2011 revenues from the United States.

EPIQ SYS INC (EPIQ): Free Stock Analysis Report

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