Wednesday, September 25, 2013

Seeking Alpha: Can A Commercial Rebound Rebuild ARC Document Solutions?

The multi-year decline in commercial construction has been particularly painful for ARC Document Solutions (ARC) (formerly known as American Reprographics). Despite having the only national reprographic services business in the country and five to 10 times the market share of its closest competitor, revenue in 2012 was only 40% of what it used to be in 2008 as the company's core architecture/engineering/construction market has gone into deep hibernation.

Although I've been writing on companies that I believe can leverage improving construction activity into higher share prices, I'm not completely sure where ARC Document fits into that group. I updated my research and models on ARC hoping to find an overlooked potential gem, but I'm just not sure that's what this is. The reprographics industry is changing and I'm not confident that the margins in the managed print services business will come close to what the company has achieved in the past. Although I can construct a bullish argument that would put ARC Document's potential fair value into the double-digits, my base-case assumption is much lower and not as much of a bargain relative to today's price when factoring in the risks of the company's changing business and end-markets.

Read more here:
Can A Commercial Rebound Rebuild ARC Document Solutions?

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