What a fantastic six months it’s been for Pitney Bowes. Shares of the company have skyrocketed 57.8%, hitting $16.93. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now the time to buy Pitney Bowes, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Pitney Bowes Not Exciting?
We’re glad investors have benefited from the price increase, but we don’t have much confidence in Pitney Bowes. Here are two reasons we avoid PBI, plus one stock we’d rather own.
1. Revenue Spiraling Downwards
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Pitney Bowes’s demand was weak and its revenue declined by 13% per year. This was below our standards and is a sign of lacking business quality.
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Pitney Bowes’s revenue to drop by 1.7%. While this projection is better than its two-year trend, it’s hard to get excited about a company that is struggling with demand.
Final Judgment
Pitney Bowes isn’t a terrible business, but it doesn’t pass our quality test. After the recent rally, the stock trades at 10.1× forward P/E (or $16.93 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We’re fairly confident there are better investments elsewhere. We’d recommend looking at one of our top digital advertising picks.
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