Remote Technology Staffing And Analytics For Business: Mastech Digital (NYSE:MHH)

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Mastech Digital (MHH) is an international supplier Information technology [IT] recruitment and digital transformation services focused on solving digital / online problems of enterprises of all shapes and sizes. Its IT staffing solutions cover both digital and legacy technologies, and digital transformation services include Salesforce.com, SAP HANA and digital learning services. The company is headquartered in Pittsburgh, with offices in the United States and India.

These are largely outsourcing and consulting services for companies that need low-cost assistance in analyzing customers and online presence, reviewing the use of internal technologies, and providing scalable point-of-point support for all types of IT issues and problems. The company works with customers to achieve higher returns on technology, minimize costs and dramatically increase success rates through the application of data and analytical expertise in data management, engineering and science.

https://www.mastechdigital.com/

Mastech Digital Website

https://www.mastechdigital.com/

Mastech Digital Website

https://www.mastechdigital.com/

Mastech Digital Website

https://www.mastechdigital.com/

Mastech Digital Website

https://mastechdigital.gcs-web.com/static-files/87e09e67-2f6b-4cbf-bafc-232742e47962

Presentation for September 2021

https://mastechdigital.gcs-web.com/static-files/87e09e67-2f6b-4cbf-bafc-232742e47962

Presentation for September 2021

https://mastechdigital.gcs-web.com/static-files/87e09e67-2f6b-4cbf-bafc-232742e47962

Presentation for September 2021

Evaluation measures

Mastech is actually one of the less expensive investment options in the IT and consulting industries. In the chart below the estimated P / E for 1 year, MHH is at the bottom of the group of analogues and competitors.

YCharts from SA

YCharts

In terms of prices for forward sales, Mastech is in the middle of its line with its hybrid business model, which deals with both consulting and remote recruitment for other companies.

YCharts from SA

YCharts

The calculation of the value of the enterprise before profit before interest, taxes, depreciation and amortization is much lower than the average S&P 500 by about 17 times today. If sales and profits continue to grow in 2022-23, this is an 11.5-fold EV to multiple EBITDA.

YCharts from SA

YCharts

At the same time, revenue growth is at the highest level compared to analogues, considering analysts’ forecasts for 2022-23. For those in Growth at a reasonable price [GARP] crowd, MHH is definitely worth your time on research.

YCharts from SA

YCharts

The return on the company’s assets is high, which is a big plus in my book, as many of their remote IT tasks require limited start-up capital. The ratio of total liabilities and assets is a low and conservative figure compared to the industry. Personally, I believe that increasing profits overall will be paramount in the future as businesses get better economies of scale. I expect that profit and profit on most indicators / comparisons will show growth in 2023-24.

YCharts from SA

YCharts

YCharts from SA

YCharts

YCharts from SA

YCharts

Strong technical scheme

The main reason I’m attracted to Mastech is that its 3-month trading schedule was pretty bullish. My attention was drawn to voluminous purchases and a clear trend of price conversion compared to analogues and the S&P 500. Its low rating and stable growth profile are probably positive phenomena that arouse interest in buying.

In the 3-year chart of total shareholder returns below, MHH was in the lead compared to a group of recruitment companies and peer / competitor consultants.

YCharts from SA

YCharts

Below is a 2-year chart of the strong uptrend in the MHH. Almost three times in its quotes between March and June 2020 is associated with unique remote IT staff during the end of the home pandemic for businesses. While the price has fallen by about 40% since the peak of 2020, the main trends in sales and profitability continue to improve. I read the long-term chart that the company is experiencing strong demand and growth that may continue regardless of the waves of COVID-19 (or lack thereof) in the future.

StockCharts.com

StockCharts.com

On the 6-month chart of the same momentum indicators we can see the real turn that appears in Accumulation / distribution line, Negative volume index and About the amount of balance readings simultaneously. It is very difficult to find a similar bullish pattern on any individual stock chart over the last three months of the overall decline in Wall Street prices. What I reflect on the MHH technical trend is the true level of shopping enthusiasm I want to be a part of. It seems that medium-term imbalances in supply and demand for stocks are now arguing in favor of ownership. I especially like the ADL and OBV figures, which have been rising since mid-January. The reason may be a lack of overhead shares.

StockCharts.com

StockCharts.com

Concluding remarks

Considering the above fundamental analysis of Mastech Digital’s valuation ratio and assuming that analysts’ current expectations regarding sales and earnings per share will not occur in 2022-23, I come up with MHH target prices at “fair value” of $ 25 for the summer and $ 30. possibly in 12 months. Further assumptions suggest that CPI inflation will average 5% or less in the calendar year 2022, and the Treasury debt yield curve will grow by only 1-2% over the next 6-12 months.

Alpha table search

Seking Alpha Analyst Estimats – February 21, 2022

Of course, I am modeling a geopolitical mess between Russia and Ukraine and / or an overly aggressive Federal Reserve cycle is not pushing the U.S. economy into recession this year. Aside from these macro risks, a stock market crash or a deteriorating bearish phase on Wall Street could keep stock quotes under pressure in the $ 15-18 range in the summer.

I hold a small position at Mastek in my diversified and insured long / short portfolio design. I can try to buy a bigger stake in the coming weeks. Placing a 20% stop loss on selling around $ 15.25 may also be a smart risk control idea for investors who don’t use high cash today or hedge short sales when building a portfolio.

Thanks for reading. Please consider this article the first step in the process of due diligence. It is recommended that you consult with a registered and experienced investment adviser before making any transaction.

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