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Stock Analyst Update

Sapient Continues to Outclass Its Competition

The stock may be down, but it's not out.


What Happened?
Consulting firm Sapient (SAPE) announced revenue and supplemental earnings for the period ending September 30 that grew 89% and 66%, respectively. The results met First Call estimates. The company continued to generate positive free cash flow in the quarter, increasing the cash on its balance sheet to $257 million from $196 million at the beginning of this year. Days' sales outstanding, or the average number of days it takes the company to collect on its receivables, rose slightly to 53 from 50 at the end of June, but remained lower than the company's target of 60. Management said it's comfortable with current First Call estimates for the rest of 2000 and for 2001.

What It Means for Investors
The results confirm our opinion that Sapient is the class of the e-business consulting industry. In the face of weak demand and a glut of competitors, Sapient continues to shine. The company's balance sheet is pristine, with no debt and a growing cash hoard. And the quality of its receivables doesn't seem to have deteriorated despite the recent cash crunch among dot-com companies. During the quarter, Sapient reduced its exposure to pure-play dot-coms from 16% of its client base to only 9%, a positive sign.

Mark Sellers does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.