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From the Survey: Sapient Corp.
Sapient Corporation (SAPE) was founded in the early 1990s in Massachusetts by J. Stuart Moore, a graduate of UC Berkeley, and Jerry Greenberg, a Harvard graduate, with $80,000 of their own capital. The technology-oriented consulting company currently has a global presence and about 10,000 employees. Market capitalization is more than $1 billion, while Greenberg and Moore sit on the board of directors and have sizeable stock positions in the company.
In 1996, Sapient went public, and the stock traded at less than a $1 (adjusted for stock splits since) until the onset of the dot-com bubble. The issue peaked at almost $50 during the height of investor hysteria in the year 2000, until the price flattened once more.
Despite initial top- and bottom-line growth, the dotcom bust hit Sapient hard. The stock price plummeted below a dollar again, and the company cut its headcount almost in half (from 3,300 to 1,806). A presence in India helped Sapient retain competitive pricing through outsourcing during the tough years that followed. Eventually, the company made its way back to profitability by 2004, and Sapient has seen its sales trending up since that time.
Sapient touts that its unique approach to consulting has been the subject of MBA case studies at Harvard and Yale. Sapient’s consulting solutions strive to bring together several trends in modern day business coherently and effectively. These trends include the latest technology (including mobile), brand marketing, and outsourcing. The company (itself a relatively “flat” organization) works across hierarchies and divisions to create custom solutions for its clients.
In July 2009, amid the fallout from the financial crisis, Sapient purchased ad agency Nitro Group Ltd., based in New York, for $31 million in cash and stock. The traditional ad agency complemented the more tech-savvy Sapient. The offspring of this coupling, SapientNitro, is headquartered in downtown Manhattan, NY, and appeals to clients trying to reach modern day consumers through a single outlet. It includes a focus on mobile, and utilizes both digital and traditional advertising methods. The business continues to win household names as customers.
Sapient operates in three main segments SapientNitro (discussed above), Global Markets and Government Services. The Global Markets segment supports financial institutions, such as investment banks. This segment has performed well of late after weakness in spending was the norm following the financial crisis. Finally, Government Services, a laggard of late in a more austere fiscal spending environment, helps government agencies fulfill their duties, as its name would imply.
Each of the segments saw an increase in revenues in 2011, with SapientNitro leading the pack. Earnings before taxes have also shown a clear upward trend across the board in recent years. Share net has not yet recovered to its peak, which occured in 2009, but that was mostly due to a lower tax rate.
Today, Sapient still has a well-diversified customer base and is an interesting company in light of ongoing technological and business trends. The company holds no debt. Nevertheless, the consulting field is a highly competitive one and it is ever shifting, while demand is subject to economic cycles. Shares currently trade at about $10, having shown little momentum over the past several months. So what does the future hold in store for this issue? Time will tell how business will pan out at Sapient in coming years, but its experience with technology will probably lend it an edge. Sapient is trying to stay on the cutting edge. Most recently, it acquired Second Story, which creates immersive experiences in physical spaces.
For more information on specific investment considerations of Sapient stock, check out our quarterly updates in the Value Line Investment Survey.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.