Surge Components Inc reports 449% Net Income growth in 2018 and 3.6 pp EBITDA Margin growth from 1.2% to 4.8%
02/28/2019 • About Surge Components Inc (
$SPRS) • By InTwits
Surge Components Inc reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is quite volatile: 4.8% in FY2018, 1.2% in FY2017, -1.5% in FY2016, 3.8% in FY2015, 2.8% in FY2014
- Surge Components Inc has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.1%.
- The company has highly profitable business model: ROIC is 24.6%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Surge Components Inc's Revenue increased on 8.7%. Revenue growth showed acceleration in FY18Q4 - it increased 10.8% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 9.8 pp from -48.9% to -39.1% in FY2018.
Gross Margin showed almost no change in FY2018. Gross Margin followed a growing trend at 0.23 pp per annum in FY2014-FY2018. SG&A as a % of Revenue decreased on 3.2 pp from 24.0% to 20.8% in FY2018. During FY2014-FY2018 SG&A as a % of Revenue topped in FY2016 at 26.7% and was declining since that time.
Net Income margin increased on 4.9 pp from 1.2% to 6.1% in FY2018.
Investments (CAPEX, working capital and M&A)
In FY2018 Surge Components Inc had CAPEX/Revenue of 0.082%. The company showed almost no change in CAPEX/Revenue from FY2015 to FY2018. It's average CAPEX/Revenue for the last three years was 0.093%.
Return on investment
The company operates at high and attractive ROIC (24.6%) and ROE (34.6%). ROIC jumped on 20.7 pp from 3.9% to 24.6% in FY2018. ROE surged on 30.2 pp from 4.4% to 34.6% in FY2018.
Leverage (Debt)
Debt level is -1.1x Net Debt / EBITDA and 0.0x Debt / EBITDA. Debt dropped on 94.0% while cash surged on 62.1%.
Surge Components Inc has no short term refinancing risk: cash is higher than short term debt (25,040.7%).
Valuation and dividends
The company's trades at EV/EBITDA 3.9x and P/E 4.0x.
Financial and operational results
FY ended 11/30/2018
Surge Components Inc ($SPRS) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 27.218 | 29.734 | 29.556 | 29.775 | 32.372 | 8.7% |
| Gross Profit | 6.676 | 7.434 | 7.463 | 7.510 | 8.283 | 10.3% |
| SG&A | 2.350 | 6.297 | 7.906 | 7.142 | 6.719 | -5.9% |
| EBITDA | 0.762 | 1.137 | -0.443 | 0.368 | 1.564 | 324.9% |
| Net Income | 0.439 | 0.865 | -0.562 | 0.357 | 1.962 | 448.7% |
Balance Sheet
|
|---|
| Cash | 6.175 | 7.169 | 7.121 | 1.087 | 1.762 | 62.1% |
| Short Term Debt | 0.218 | 0.000 | 0.000 | 0.506 | 0.007 | -98.6% |
| Long Term Debt | 0.000 | 0.000 | 0.000 | 0.033 | 0.026 | -21.6% |
Cash flow
|
|---|
| Capex | 0.059 | 0.060 | 0.009 | 0.050 | 0.027 | -46.2% |
Ratios
|
|---|
| Revenue growth | 7.6% | 9.2% | -0.6% | 0.7% | 8.7% | |
| EBITDA growth | -47.2% | 49.3% | -139.0% | -183.0% | 324.9% | |
|
|---|
| Gross Margin | 24.5% | 25.0% | 25.2% | 25.2% | 25.6% | 0.4% |
| EBITDA Margin | 2.8% | 3.8% | -1.5% | 1.2% | 4.8% | 3.6% |
| SG&A, % of revenue | 8.6% | 21.2% | 26.7% | 24.0% | 20.8% | -3.2% |
| Net Income Margin | 1.6% | 2.9% | -1.9% | 1.2% | 6.1% | 4.9% |
| CAPEX, % of revenue | 0.2% | 0.2% | 0.0% | 0.2% | 0.1% | -0.1% |
|
|---|
| ROIC | 6.7% | 9.5% | -4.0% | 3.9% | 24.6% | 20.7% |
| ROE | 4.1% | 7.6% | -4.9% | 4.4% | 34.6% | 30.2% |
| Net Debt/EBITDA | -7.8x | -6.3x | | -1.5x | -1.1x | 0.4x |
Surge Components Inc ($SPRS) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 7 | 7 | 9 | 9 | | 23.3% | -2.3% | 6.7% | 10.8% |
| EBITDA | 0 | 0 | 0 | 1 | | | | -31.8% | 140.8% |
| Net Income | 0 | 0 | 0 | 1 | | | | -18.6% | 258.6% |
Balance Sheet
|
|---|
| Cash | 1 | 1 | 1 | 2 | | -85.3% | 125.2% | -46.6% | 62.1% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | -65.6% | -98.6% |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | -21.6% |
Ratios
|
|---|
| Gross Margin | 26.0% | 26.4% | 22.7% | 27.6% | | 1.1% | 2.3% | -3.2% | 1.8% |
| EBITDA Margin | 1.4% | 2.6% | 4.1% | 10.2% | | 9.9% | 3.7% | -2.3% | 5.5% |
| Net Income Margin | 0.5% | 2.3% | 3.6% | 16.1% | | 6.7% | 3.7% | -1.1% | 11.1% |
Peers in Technology Distributors
Below you can find Surge Components Inc benchmarking vs. other companies in Technology Distributors industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Tech Data Corporation ($TECD) | | 3.2% | -4.7% | -8.3% | 38.9% |
| EACO Corp ($EACO) | | 4.1% | 5.9% | 5.7% | 23.1% |
| Richardson Electronics, Ltd. ($RELL) | | -0.7% | 3.7% | -3.6% | 19.2% |
| Synnex Corporation ($SNX) | | -3.6% | 5.4% | 21.2% | 17.6% |
| Wayside Technology Group, Inc. ($WSTG) | | 12.1% | 9.4% | -61.6% | 13.0% |
| |
|---|
| Median (16 companies) | | 4.1% | 5.3% | 5.7% | 8.5% |
|---|
| Surge Components Inc ($SPRS) | | 9.2% | -0.6% | 0.7% | 8.7% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Taitron Components Incorporated ($TAIT) | 25.4% | 31.1% | -10.8% | 39.4% | 44.0% |
| Richardson Electronics, Ltd. ($RELL) | 29.7% | 30.0% | 31.6% | 32.1% | 33.7% |
| EACO Corp ($EACO) | 27.5% | 29.3% | 29.3% | 28.5% | 28.5% |
| ADDvantage Technologies Group, Inc. ($AEY) | 32.3% | 35.0% | 32.2% | 30.4% | 23.7% |
| ePlus inc. ($PLUS) | 21.7% | 21.4% | 21.8% | 22.5% | 22.8% |
| |
|---|
| Median (16 companies) | 14.2% | 13.5% | 13.8% | 16.5% | 15.6% |
|---|
| Surge Components Inc ($SPRS) | 24.5% | 25.0% | 25.2% | 25.2% | 25.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Taitron Components Incorporated ($TAIT) | -8.6% | -3.2% | -39.0% | 13.0% | 19.2% |
| CDW Corporation ($CDW) | 7.3% | 7.5% | 7.7% | 7.6% | 7.7% |
| ePlus inc. ($PLUS) | 7.3% | 7.5% | 7.6% | 7.3% | 7.1% |
| EACO Corp ($EACO) | 4.0% | 4.5% | 4.7% | 4.5% | 5.9% |
| Anixter International Inc. ($AXE) | 6.3% | 5.1% | 4.6% | 4.8% | 4.5% |
| |
|---|
| Median (16 companies) | 3.2% | 3.5% | 3.6% | 3.8% | 4.0% |
|---|
| Surge Components Inc ($SPRS) | 2.8% | 3.8% | -1.5% | 1.2% | 4.8% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Richardson Electronics, Ltd. ($RELL) | 2.0% | 3.5% | 3.4% | 3.8% | 3.2% |
| ePlus inc. ($PLUS) | 0.9% | 1.0% | 2.1% | 1.5% | 1.0% |
| EACO Corp ($EACO) | 0.6% | 0.4% | 0.3% | 5.5% | 0.8% |
| Avnet, Inc. ($AVT) | 0.4% | 0.6% | 0.8% | 0.7% | 0.8% |
| PC Connection, Inc. ($CNXN) | 0.3% | 0.5% | 0.4% | 0.4% | 0.8% |
| |
|---|
| Median (16 companies) | 0.5% | 0.6% | 0.4% | 0.5% | 0.5% |
|---|
| Surge Components Inc ($SPRS) | 0.2% | 0.2% | 0.0% | 0.2% | 0.1% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| CDW Corporation ($CDW) | 16.5% | 17.3% | 18.8% | 20.1% | 23.1% |
| EACO Corp ($EACO) | 19.6% | 21.8% | 22.2% | 16.1% | 21.2% |
| ePlus inc. ($PLUS) | 20.1% | 21.0% | 21.5% | 22.8% | 20.8% |
| Insight Enterprises, Inc. ($NSIT) | 17.0% | 17.4% | 20.7% | 19.3% | 20.0% |
| PC Connection, Inc. ($CNXN) | 20.1% | 19.9% | 18.6% | 16.6% | 17.0% |
| |
|---|
| Median (17 companies) | 13.6% | 12.1% | 12.5% | 11.5% | 11.2% |
|---|
| Surge Components Inc ($SPRS) | 6.7% | 9.5% | -4.0% | 3.9% | 24.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Synnex Corporation ($SNX) | 2.0x | 0.9x | 1.2x | 2.1x | 3.9x |
| Anixter International Inc. ($AXE) | 3.2x | 4.7x | 3.6x | 3.0x | 3.1x |
| ScanSource, Inc. ($SCSC) | -1.4x | -0.9x | 0.2x | 0.6x | 2.5x |
| CDW Corporation ($CDW) | 3.2x | 3.3x | 2.8x | 2.7x | 2.4x |
| Arrow Electronics, Inc. ($ARW) | 1.8x | 2.2x | 2.2x | 2.3x | 2.2x |
| |
|---|
| Median (15 companies) | 0.1x | -0.2x | 0.2x | 1.2x | 1.2x |
|---|
| Surge Components Inc ($SPRS) | -7.8x | -6.3x | | -1.5x | -1.1x |
