While ARC Document Solutions (NYSE:ARC) has reported three straight years of higher free cash flow, the underlying performance trends in the business haven't been as encouraging. It doesn't seem to be leveraging a better commercial construction environment, and it looks as though the company is likely to struggle to make a real dent in the managed print services opportunity. While archiving has been growing for ARC, I believe the company is going to have a hard time making real competitive inroads into this market.
It's tempting to say that the worst is over. The shares have bounced
off their low, the short interest is pretty small, commercial
construction activity looks okay, and the shares seem to trade at low
multiples to book, EBITDA, and revenue. That said, I'm concerned that
the company is going to continue to struggle to find real traction with
its projected growth drivers, and I don't see enough evidence yet to be
very positive on this name as a dumpster-diving candidate.
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ARC Document Solutions Struggling For Real Traction