ePlus (PLUS)

IT solutions provider ePlus (NASDAQ:PLUS) announced better-than-expected revenue in Q3 CY2025, with sales up 18.2% year on year to $608.8 million. Its non-GAAP profit of $1.53 per share was 61.9% above analysts’ consensus estimates.

Company Overview

Starting as a financing company in 1990 before evolving into a full-service technology provider, ePlus (NASDAQ:PLUS) provides comprehensive IT solutions, professional services, and financing options to help organizations optimize their technology infrastructure and supply chain processes.

IT Distribution & Solutions will be buoyed by the increasing complexity of IT ecosystems, rising cloud adoption, and demand for cybersecurity solutions. Enterprises are less likely than ever to embark on these complicated journeys solo, and companies in the sector boast expertise and scale in these areas. However, cloud migration also means less need for hardware, which could dent demand for large portions of the product portfolio and hurt margins. Additionally, planning for potentially supply chain disruptions is ongoing, as the COVID-19 pandemic showed how damaging a pause in global trade could be in areas like semiconductor procurement.

ePlus competes with large IT solution providers and value-added resellers such as CDW (NASDAQ:CDW), Insight Enterprises (NASDAQ:NSIT), and Connection (NASDAQ:CNXN), as well as with the professional services divisions of major technology manufacturers and consulting firms.

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $2.26 billion in revenue over the past 12 months, ePlus is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale. On the bright side, it can still flex high growth rates because it’s working from a smaller revenue base.

As you can see below, ePlus’s sales grew at a solid 7.3% compounded annual growth rate over the last five years. This shows it had high demand, a useful starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. ePlus’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

This quarter, ePlus reported year-on-year revenue growth of 18.2%, and its $608.8 million of revenue exceeded Wall Street’s estimates by 17.5%.

Looking ahead, sell-side analysts expect revenue to decline by 6.2% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will face some demand challenges.

ePlus was profitable over the last five years but held back by its large cost base. Its average operating margin of 7.5% was weak for a business services business.

Analyzing the trend in its profitability, ePlus’s operating margin decreased by 1.1 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. ePlus’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, ePlus generated an operating margin profit margin of 8%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

ePlus’s EPS grew at a solid 10.3% compounded annual growth rate over the last five years, higher than its 7.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into ePlus’s quality of earnings can give us a better understanding of its performance. A five-year view shows that ePlus has repurchased its stock, shrinking its share count by 1.4%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For ePlus, its two-year annual EPS declines of 5.5% mark a reversal from its (seemingly) healthy five-year trend. We hope ePlus can return to earnings growth in the future.

In Q3, ePlus reported adjusted EPS of $1.53, up from $1.36 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects ePlus’s full-year EPS of $4.96 to shrink by 16.4%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

ePlus has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 5% over the last five years, slightly better than the broader business services sector.

Taking a step back, we can see that ePlus’s margin expanded by 4.1 percentage points during that time. This shows the company is heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

ePlus historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 14.7%, somewhat low compared to the best business services companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, ePlus’s ROIC has stayed the same over the last few years. If the company wants to become an investable business, it must improve its returns by generating more profitable growth.

One of the best ways to mitigate bankruptcy risk is to hold more cash than debt.

ePlus is a profitable, well-capitalized company with $402.2 million of cash and $98.53 million of debt on its balance sheet. This $303.6 million net cash position is 13.7% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

It was good to see ePlus beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 7.6% to $79 immediately after reporting.

Updated: December 4, 2025 at 11:11 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own ePlus, you should also grasp the company’s longer-term business quality and valuation.

ePlus isn’t a terrible business, but it doesn’t pass our bar. Although its revenue growth was solid over the last five years, it’s expected to deteriorate over the next 12 months and its projected EPS for the next year is lacking. And while the company’s rising cash profitability gives it more optionality, the downside is its operating margins are low compared to other business services companies.

ePlus’s P/E ratio based on the next 12 months is 19.9x. Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $92 on the company (compared to the current share price of $90.02).