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PC Connection, Inc. (PCCC) just posted its sixth consecutive earnings surprise, driven by increases in business spending.

Estimates and sales are climbing, creating a fantastic value as well as growth story for this Zacks #1 Rank (Strong Buy).

Company Description

PC Connection operates under several companies that offer custom-configured computer systems to individuals as well as government agencies and businesses.

A Great Year

On Feb 2 PC Connection reported fourth-quarter and full-year results, both looked good. Annual sales were up 26% to $1.97 billion. Sales for the quarter were up 20%, to $556 million. Both sales figures marked company records.

Net income for the year was $23 million, up from a $1.2 million loss in 2009. The quarter marked the company's sixth straight surprise when earnings came in at 26 cents, beating the consensus by 2 cents.

Business and Retail Recovery

The current economy is pretty well represented in PC Connection business segments. Sales to businesses are climbing sharply as companies are able to ramp up tech spending and also seeing a boost from pent up IT and PC upgrade demand.

However, sales to government and education customers are off just over 1%. Sales to consumers are also down, but that is a very small segment of PC Connection's business. The dip in consumer sales could be attributed to the sluggish labor market and even sagging home values, to some extent. PCCC did say that it is trying to increase its visibility in that area.

Estimates Up Nicely

While there is only 1 analyst that makes up the consensus, it did move 5 cents higher for both this year and 2012. The forecasts are now at $.90 and $1.00, which represent growth rates of 6% and 11%, respectively.

And a Great Value

Shares of PCCC are trading at just 10 times forward estimate, which leaves it with a PEG of 0.8. A good bargain by any standards, but if you go past the earnings multiples there is even more to like. The Price to book is just under 1.0 and the price to sales is only 0.13.

The Chart

Take a look at the expected earnings per share in the years below. There has been a very sharp turn around, yet the share price is well below where it was the last time estimates were this high.

PC Connection, Inc. - ticker PCCC >


Bill Wilton is the Aggressive Growth Stock Strategist for He is also the Editor in charge of the market-beating Zacks Small Cap Trader service

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