Sunday, November 13, 2016

ARC Document Solutions – stock price soared this past week

I find it interesting to watch and see what’s happening with the stock price of ARC Document Solutions, especially since the election results made it clear that Trump won.

ARC’s stock price, at close of trading on Monday November 7th was $3.50.

ARC’s stock price, at close of trading on Friday November 11th was $4.36.

That’s a significant gain (24.5 %) in just a few days!

ARC is expected (according to at least one analyst that follows ARC’s stock) to report sales of $405.29 Mil for year 2016.

If that estimate is correct, 2016 will be the first time in four years that ARC’s sales have fallen year over year.

ARC’s sales for:
Year 2012 - $406.12
Year 2013 - $407.19
Year 2014 - $423.76
Year 2015 - $428.67 Mil
Year 2015 - $405.29 (Analyst’s high-estimate for Year 2016 per Yahoo Finance)

So, if ARC’s sales are headed in the wrong direction, what’s driving up the price of ARC’s stock?

Well, one of President-elect Trump’s statements is that he will spend billions of bucks on building (re-building) our nation’s infrastructure.  (Think roads, highways, bridges, airports, etc, and also think about the earth’s second “great wall” – the one that will be built on the US/Mexico border.)

In the past (i.e., traditionally) when spending on infrastructure building was increased, there was almost a guarantee that reprographics revenues would rise; increased planning and design, increased construction = increased plan and spec printing for those projects.

But, will this happen this time around, or will the increase in reprographics work not be proportionate to the increase in planning, design and construction?  And, if there isn't a proportionate increase in reprographics revenues, will ARC's sales of technology services/products (think Skysite) be great enough to propel ARC's sales higher?

My take on this is that most in the financial/investment community have very little knowledge about what’s been happening to the reprographics industry the past 10 or so years.  And that, based on that, they are betting that ARC’s revenues will grow, when there is evidence that that may not happen. 

We’ll see!  And, it will be interesting to see.

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