Shares of Pitney Bowes (NYSE:PBI) climbed as much as 20% on Friday in an apparent reaction to a private equity buyout of one of the company’s rivals, Stamps.com (NASDAQ:STMP). That company is being acquired at a substantial premium, leading investors to reconsider Pitney Bowes’ valuation.
Pitney Bowes is a 100-year-old shipping company, best known for its classic postage meters. But in recent years it has shifted to digital shipping services, including customer information management and mailings for e-commerce. It made that shift, in part, due to the disruption in the business by Stamps.com.
Stamps.com got a big boost on Friday when private equity firm Thoma Bravo agreed to acquire it for $330 per share in cash, a premium of 67% to the company’s Thursday close. In total, the deal values Stamps.com at about $6.6 billion, or more than eight times the company’s $795.7 million in revenue over the past 12 months.
Pitney Bowes, by comparison, trades at less than one time revenue.
The two companies don’t make for a perfect apples-to-apples comparison, but they are close enough to cause Pitney Bowes shares to jump on Friday.
Pitney Bowes has been a tough stock to love in recent years. Even after Friday’s jump, it’s down 48% over the past five years, losing to the S&P 500 by about 150 percentage points.
This remains a company trying to cope with a digital revolution that has fundamentally altered its business model. Pitney Bowes has made some strides in its transformation, and this is hardly the first time the company’s shares have had an extreme reaction to potential upside, but it’s still a long way from being considered a growth stock. Investors shouldn’t expect a Thoma Bravo-type offer anytime soon.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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