Cimpress (CMPR) Shows Long-Term Promise With Holistic Growth

On Aug 16, we updated the research report on business services provider, Cimpress N.V. (NASDAQ:CMPR) .

With the use of proprietary web-based design software and advanced computer integrated printing facilities, Cimpress has developed a competitive advantage over traditional graphic design and printing methods. The company has shifted its value proposition away from deep discounts and free-offer direct marketing efforts to tap the large market opportunity beyond the traditional base of highly price-sensitive customers. Cimpress is making steady progress with investments in new markets and its business strategy is now focused on higher quality products and delivery, increased customer service and more transparent pricing to promote long-term customer relationships.

The scale of Cimpress’ operation gives small business customers access to quality products and printing services that would otherwise have been out of their reach. The company’s product line has expanded to include a wide variety of offerings for its customers’ marketing needs. Due to the high volume of orders placed through its systems each day, Cimpress is able to execute multiple orders in one print run. In this manner, the company is able to use high-end printing presses that normally would be economically unfeasible for small batch printing jobs. The company is also focusing on digital marketing services like email, online search and social media marketing.

In addition, Cimpress has been acquiring firms with complementary product offerings and expects to ramp up its revenues with operating synergies through economies of scale and technological collaboration to serve a wide spectrum of customers across the globe. Cimpress has outperformed the industry with an average return of 4.6% as against a loss of 5% for the latter in the last three months.

Cimpress’ business is scalable and its web presence and online tools for customer use are well established. While additional demand would result in various capital investments such as additional printing presses, these fixed costs would be spread over a wider revenue base. The company’s solid operational position is also reflected in its history of strong fundamentals, which we expect to continue going forward.

Management has also decided to implement a radical change in the organizational structure by decentralizing operations to improve accountability for customer satisfaction and capital returns, simplify decision-making and improve the speed of execution. With operations in about 50 locations spanning 30 countries across six continents, decentralized decision making will enable the company to be nimble and entrepreneurial. The evolved corporate structure will likely lead to more accountability as the company expands into new geographical boundaries and markets to strengthen its position as a leading provider of mass customization business products. On completion of the process, Cimpress expects annualized pre-tax operating expense savings of approximately $55 million to $60 million and pre-tax free cash flow savings of approximately $45 million to $50 million owing to lower share-based compensation expense.

We remain impressed with the inherent growth potential of this Zacks Rank #1 (Strong Buy) stock. Other stocks worth considering in the industry include CBIZ, Inc. (NYSE:CBZ) , CRA International, Inc. (NASDAQ:CRAI) and Exponent, Inc. (NASDAQ:EXPO) , each carrying a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

CBIZ topped estimates thrice in the trailing four quarters with an average positive earnings surprise of 24.33%.

CRA International topped estimates twice in the trailing four quarters with an average positive earnings surprise of 5.34%.

Exponent topped estimates thrice in the trailing four quarters with an average positive earnings surprise of 10.14%.

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