Command Security Corporation (AMEX:MOC), a US$30.83M small-cap, is a commercial services company operating in an industry, whose performance is linked to business conditions and the general economy, as it draws revenue from industries across different sectors. Companies in the industry are faced with building their strategies around the evolving conditions and the potential for further consolidation by focusing resources on increasing market share by growing channels. Commercial services analysts are forecasting for the entire industry, a positive double-digit growth of 10.70% in the upcoming year , and a single-digit 2.68% growth over the next couple of years. This rate is below the growth rate of the US stock market as a whole. Is the commercial services industry an attractive sector-play right now? Below, I will examine the sector growth prospects, and also determine whether Command Security is a laggard or leader relative to its service sector peers. Check out our latest analysis for Command Security
What’s the catalyst for Command Security’s sector growth?
A main driver of the industry has been the growing relevance of e-commerce for commercial services, enabling companies to reduce cost to serve while growing market presence at the same time. A crucial strategy for incumbents is to be well-positioned in response to the growing importance of stockless independent dealers, as well as building up their own capabilities around e-commerce. In the previous year, the industry saw growth of 5.53%, though still underperforming the wider US stock market. Command Security lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means Command Security may be trading cheaper than its peers.
Is Command Security and the sector relatively cheap?
The commercial services industry is trading at a PE ratio of 18.06x, relatively similar to the rest of the US stock market PE of 18.79x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a higher 12.70% compared to the market’s 10.48%, potentially illustrative of past tailwinds. Since Command Security’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Command Security’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:Command Security has been a commercial services industry laggard in the past year. If Command Security has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although it delivered lower growth relative to its services peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. However, before you make a decision on the stock, I suggest you look at Command Security’s fundamentals in order to build a holistic investment thesis.
- 1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- 2. Historical Track Record: What has MOC’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Command Security? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!