Zacks.com: Analyst Blog

Earlier this month, Epicor Software (EPIC) announced that it is experiencing strong demand for its Epicor Outsourcing services from companies such as Ericsson, Bonso Electron Intl, National Multiple Sclerosis Society and Tomra of North America. Epicor Outsourcing helps companies reduce their overall cost of enterprise resource planning (ERP) solution, while helping to manage and minimize risk across the organization.

Though outsourcing is still a relatively small part of the company's overall services business, the number of customers have doubled in the past two years. Based in California, Epicor develops and markets enterprise application software solutions targeting mid-sized companies with annual revenue of $10 million to $1 billion. According to Gartner, Inc., enterprise software sales grew 13.9% to $229.2 billion in 2008. The market is forecasted to reach $244.3 billion in 2009, an increase of 6.6% from 2008.

The company released its key product Epicor 9 in December 2008. It had invested in this product five years ago and launched the first phase in December. Management stated that this product has been highly successful and had been the key factor behind the growth particularly in North American and Western Europe. March quarter was challenging for the company due to tough economic conditions, which continue to impact purchasing decisions and implementation timelines. The company is primarily exposed to retail customers which have been the worst hit in this downturn. However, the conditions seem to have recovered a bit towards the end of the quarter.

Meanwhile, the stock has almost doubled to $5.24 on June 30, 2009 from a 52-week low of $2.36 on February 23, 2009. At current price, the stock is trading at a P/E of 13.7 times FY2009 EPS estimate of $0.38. This is in line with its peers like Oracle Corp. (ORCL) and SAP (SAP). We maintain a Hold on the stock.