Ciber Inc. – Incredible Upside from Today’s Price

CIBER, Inc. [NYSE:CBR - $2.87] is a global information technology consulting, services and outsourcing company for both commercial and government clients. Services include application development and management, ERP implementation, change management, project management, systems integration, infrastructure management and end-user computing, as well as strategic business and technology consulting. Founded in 1974, CIBER has more than 8,000 employees. They operate in 18 countries with 14 Global Solution Centers and 70 local offices in North America, Europe and Asia/Pacific. Annual revenue in 2009 exceeded $1.0 billion. CIBER is included in the Russell 2000 Index and the S&P Small Cap 600 Index.

CBR had a tough 2009 due to recessionary conditions and the credit market’s freeze which forced them to issue new shares at an unfavorable price when maturing debt could not be rolled over at reasonable terms.

EPS dropped from $0.50 to $0.22 from 2008 to 2009 and book value was slightly diluted due to the secondary offering. Even so, today’s exceptionally low price makes Ciber shares look extremely undervalued.

Here are the per share numbers for CBR as reported by Value Line:

Consensus views for 2010 – 2011 project $0.22 and $0.32 putting CBR’s P/E at about 13x this year’s and < 9x the 2011 estimate. It doesn’t seem a stretch to think that CBR could trade at fifteen times the 2011 expectation or $4.80 /share sometime within the next 18 months. That leaves the shares with 67% upside from yesterday’s closing trade.

Back in 2002 – 2003 when EPS were similar at $0.22 and $0.31 CBR shares hit highs each year of over $11. In fact, just a glance at the chart above shows that CBR peaked at $5.66 and higher during each calendar year since 2001. CBR shares changed hands at $4.25 just a couple of weeks ago. A rebound to that April high would represent a 48% rise from the May 25^th close.

At just 39.4% of book value CBR is a potential takeover target. Many times in the past decade Ciber has commanded more than twice book value.

The recent market sell-off and CBR’s accompanying share price collapse has created opportunity. I see very little downside risk from $2.87 and wouldn’t be surprised to see a 50% – 100% move up over the next 12 – 18 months.

Dr. Paul Price – May 26, 2010

www.BeatingBuffett.com

Disclosure: Author is long CBR shares and short CBR options.