Penson Worldwide, Inc. (NASDAQ:PNSN)

NetscribeFinancl (< 20) Submitted: 3/19/2007 2:23:53 AM : Start Price: $27.38 PNSN Score: -99.41

Penson Worldwide is a provider of a range of critical securities-processing infrastructure products and services to the global securities and investment industry having its operations in the US, Canada and the UK. Its products and services include securities and futures clearing, margin lending, facilities management, technology and other related offerings to broker-dealers, hedge funds, banks and financial technology firms. Its principal clients are online, direct access, retail brokers, banks, institutional brokers, financial technology companies and securities exchanges. Company’s revenue model of clearing services is on a variable cost structure based on transaction volume and providing an integration of front, middle and back office systems while allowing near real time updating of account status and margin balances.
For fiscal 2006, company’s revenues increased by 65% to $287.6 million led by sales from the clearing operations, higher interest income and increased technology sales. Net income from continuing operations totaled $24.3 million, up from $2.7 million reflecting improved operating margins and decreased interest expense on long-term debt. While the company’s 57% of the revenues come from interest income, about 26% comprise of clearing operations and a mere 4% from technology revenues.
In the past couple of years, company on high growth phase has made various acquisitions It acquired Tick Data, and Computer Clearing Services in 2005 and 2006 respectively. In February 2007, the company completed the acquisition of Goldenberg, Hehmeyer a futures clearing and execution business. The futures industry is an exciting and rapidly growing area, due to which the acquisition is lucrative. Although Goldenberg Hehmeyer customer business has been slowed by a lack of capital and lack of ability to offer multi-asset classes in an integrated way, but the acquisition will create synergies and solve both of these issues, leading to a powerful new competitor in the futures space.
Company has been able to maintain strong cash balances over the years which have given it the edge and freedom to make acquisitions and expand its operations. Again management’s ability to continue to uncover more in the way of accretive, bolt-on acquisitions is the largest source of upside. The company’s revenue and EPS growth of 37.06% and 117.55% respectively have been outperforming the industry growth rates of 35.13% as well as 37.85% for the same parameters which shows the potential of the company to outperform.