Presidio Incorporated (Nasdaq Global Select: PSDO) - STRONG Buy Recommendation

Shares of Presidio (Pending:PSDO) could see a strong boost ahead of the IPO quiet period expiration on April 4th. This 25-day period began with the March 10 IPO. After April 4th, Presidio's IPO underwriters are finally allowed to publish detailed positive reports and recommendations. (Doing so earlier could have too much influence over the newly trading stock, given a usual dearth of information at a company's debut.)

Presidio's influential underwriting team includes: Citigroup Global Markets, J.P. Morgan, Apollo Global Securities, Barclays Capital, Credit Suisse Securities, Evercore Group, Goldman Sachs, Guggenheim Securities, LionTree Advisors, RBC Capital Markets, and Wells Fargo.

Presidio's share price will likely see a temporary increase as a result of the event, according to our firm's research.

We previously highlighted this event on our IPO Insights platform.

Solid Early Market Performance

PSDO was priced at $14, at the low end of its expected price range of $14 to $16. Still, the stock closed at $14.90 on its first day of trading and has performed steadily since, currently priced at $14.80 (close on 3.29).

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Business Overview: Provider of IT Solutions to the Middle Market in North America

Presidio provides information technology (IT) solutions to digital infrastructure, cloud, and security sectors in North America. These solutions encompass collaboration, networking, Internet of Things, enterprise mobility, and data analytics. In addition, Presidio offers migration services and cloud enablement, and private, hybrid, and multi-cloud solutions, which include operational support to customers, managed cloud services, data center modernization, orchestration, and automation.

Presidio Inc. also offers information security services (assessing, designing and implementing security measures to protect business data), as well as risk assessments, reporting, reviews, program development, and employee training. The company serves the education, government, financial services, and healthcare industries.

As of June 2016, Presidio had approximately 7,000 clients.

At the time of IPO, Presidio reported total revenues of $2.17 billion for the year that ended on June 30, 2016 and $1.495 billion for the six months ended on Dec. 31, 2016. (This was a 9% increase from the same six-month period in 2015.) Concurrently, the company reported a net loss of $3.4 million for the fiscal year that ended June 30, 2016, but positive net income of $9 million for the six months that ended on Dec. 31, 2016.

We were somewhat concerned about Presidio's heavy debt levels but liked that the company intended to use its IPO proceeds to repurchase its subordinated and senior notes and any remaining to repay a portion of its credit facility.

Management Team

President and CEO Robert Cagnazzi has served in his position since 2012. His previous experience comes from senior positions at Total Convergence Solutions, Bluewater Communications, Dimension Data North America, and ISG. Mr. Cagnazzi is a Graduate of St. Johns University with a Bachelor of Science in Finance and an MBA in Marketing from New York University.

CFO and Secretary Paul Fletcher has served in his position since 2007. His previous experience includes senior financial positions at Trex Co. Inc., AMX, Excel Telecommunications, and Siena Holdings. Mr. Fletcher has an MBA in Finance and Management Policy from Northwestern University's Kellogg School of Management and received a BA summa cum laude in Economics and Management from Albion College.

Major Competitors: Accenture, CDW, Deloitte, IBM, and Optiv

Although Presidio targets the middle market in North America, it faces considerable competition from enterprise level companies including Accenture (NYSE:ACN), IBM Global Services (NYSE:IBM), Deloitte, Optiv, HP Enterprise Services (NYSE:HPE), Xerox Global Services (NYSE:XRX), Cognizant (Nasdaq:CTSH), Dell (Nasdaq:DVMT), Systemax (NYSE:SYX), and Unisys (NYSE:UIS).

At current levels, PSDO has a 0.5 P/S below the industry average of 1.8.

Conclusion: Buying Opportunity

Despite a somewhat flat IPO, PSDO has gained momentum and is backed by a very strong and diverse team of underwriters. Combined, they could reach a wide audience with the likely release of positive research reports once restrictions are lifted.

The company operates in a fast growing market, is valued below industry average, and appears to have more room to grow.

We see a short-term buying opportunity ahead of April 4th for event-driven investors, as well as a potential chance to buy into PSDO longer term.