CDW Shares Rise Post-IPO


CDW this week completed its IPO with an opening share price at the low end of its recently reduced price range, but one financial analyst who focuses on company valuations said CDW actually did quite well compared with its peers.

CDW, which earlier this week slashed its IPO price range to $17 to $18 per share, Wednesday closed its first day of trading as a public company with a per-share price of $18.37 after opening at $17 per share.

Shares Friday rose 1.36 percent to close at $18.62 a share.

[Related: CDW Slashes IPO Price]

CDW, in its Wednesday Securities and Exchange Commission filing, reported full-year 2012 sales of $10.1 billion, up 5.5 percent over sales in 2011, with gross profit up 5.4 percent to $1.67 billion and net income of $119.0 million.

CDW revenue in 2006, the last full year before it went private, was reported as $6.8 billion, with income reported for that year of $266 million.

The solution provider in the filing estimated the total addressable U.S. market for indirect sales channels is more than $200 billion a year, and that its sales into the U.S. of $9.7 billion is about 5 percent of the total market. CDW also claims a 5 percent share of the Canadian indirect sales channel.

About 21 percent of CDW's revenue comes from sales of Hewlett-Packard products, while 13 percent comes from Cisco Systems sales. Its top six vendors, including Apple, Cisco, EMC, HP, Lenovo and Microsoft, accounted for 56 percent of its 2012 revenue, CDW said in the SEC filing.

Marty Wolf, president of MartinWolf, a San Ramon, Calif.-based advisory firm, wrote in an advisory note following CDW's IPO that the company did very well compared with its peers despite its final IPO price of $17 per share.

CDW was valued at 9.0 times its EV/EBITDA (enterprise value earnings before interest, taxes, depreciation and amortization), Wolf wrote. EV/EBITDA is a financial measure of a company's valuation designed to be used for comparing the value of multiple companies with different levels of debt.

Wolf wrote that the median for IT supply chain services companies is 6.5 times EV/EBITDA, giving CDW a 39 percent premium compared with its peers.

"CDW out-executes its competitors with a leaner operating model delivering 7 percent EBITDA margins on sales, versus the 3 percent median reported by its peer group. CDW has also met shareholder expectations. Compared to Insight and PC Connection, two close competitors, CDW is selling the same general products but with an operating income that is 2-3x greater," Wolf wrote.

CDW did not respond to requests for more information on its post-IPO plans.

PUBLISHED JUNE 28, 2013