Intense Market for Epicor Software
Epicor Software Corp.'s (EPIC) strategy is to create enterprise software applications on industry-standard technologies to lower the total cost of ownership and to respond swiftly to next-generation demands. Another important part of Epicor's strategy is to provide vertical solutions that can be tailored for midsized companies.
However, the company operates in an intensely competitive landscape. It faces competition from large, multinational ERP vendors such as Oracle (ORCL) and SAP (SAP). These firms have greater financial resources and are moving aggressively towards acquiring a market niche.
For full year 2008, management expects revenues between $536 million and $544 million. Epicor's stock is trading at 8.3 times our 2008 EPS estimate of $0.92. We set a target price of $9.50. This implies applying a target multiple of 10.3x our pro forma 2008 EPS estimate, which excludes the impact of stock-based compensation.
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