Longbow Research Initiates Epicor Software (EPIC) Coverage With A Buy Rating

Longbow Research analysts Steve Koenig and Bonnie Cybulko initiated coverage of Epicor Software Corporation (Nasdaq: EPIC) with a Buy rating and a price target of $13.

The analysts said that Epicor Software Corporation earned a Buy rating because they believed the company was well positioned to profit from a potential ERP market recovery, in part because last year the company chose to keep quota carrying salespeople.

The Longbow Research analysts also said that the second reason they think the stock is a Buy is because they see rising margins as a possibility.

The Longbow Research analysts wrote, "a secondary reason for our BUY rating on EPIC shares is our outlook for margin expansion due to operating leverage. EPIC did not take significant restructuring actions in FY09, as management sought to preserve the company’s ability to generate revenue growth in a potential recovery. As a result, EPIC should not need to increase operating expenditures significantly (apart from sales commissions and above-the-line consulting resources) over the next 12 to 24 months even if revenues grow in accordance with our expectation for 10%+ license growth and mid-single-digit total revenue growth. The consensus FY11 EPS estimate of $0.62 looks to underestimate operating margin leverage, as it implies a flat operating margin (15.4%) relative to FY10, by our calculations."