Assessing ePlus: Strong Performance Meets Valuation Concerns

Shares of ePlus recently surged to a 52-week peak, propelled by a robust quarterly earnings report. However, this upward momentum exists alongside analyst warnings regarding the stock's valuation and future revenue trajectory, presenting investors with a complex picture.

The company's operational strength was on full display in its Q2 report for fiscal 2026, with results handily surpassing consensus estimates. Key financial highlights from the quarter include:

• Earnings Per Share (EPS): Reported at $1.53, significantly above the $1.23 consensus estimate, representing a positive surprise of 24.39%.
• Revenue: Reached $608.8 million, beating expectations of $532.55 million by 14.32%.
• Consolidated Net Sales: Increased by 23.4% to $608.8 million.
• Services Revenue: Grew 19.4% to $123.8 million.
• Consolidated Gross Profit: Rose 27.4% to $162.1 million.
• Net Income from Continuing Operations: Jumped 92.7% to $38.2 million.
• Adjusted EBITDA: Climbed 61.6% to $58.7 million.

In response to this performance, management raised its full-year fiscal 2026 outlook. The updated guidance now projects mid-double-digit growth for net sales, gross profit, and adjusted EBITDA.

Share Price Momentum and Strategic Moves

The stock achieved a 52-week high of $93.44 on December 11. It closed the following day, December 12, at $91.75, a decline of approximately 1.48% from the prior close. Performance metrics show a six-month gain of 29.19% and a year-to-date increase of 25.33%, with an additional 2.4% advance in the two weeks leading up to the report.

The company's growth initiatives are being supported by strategic actions. These encompass the acquisition of certain Realwave assets, an expansion of its managed services and maintenance portfolios for Juniper Networks, and the launch of a new industry survey focused on artificial intelligence (AI).

Should investors sell immediately? Or is it worth buying ePlus?

The Valuation Debate

Despite the operational excellence, not all analytical perspectives view the equity as favorably priced. InvestingPro's models currently suggest the stock is slightly overvalued. Analysis from Simply Wall St. on December 12 highlighted that revenues have stagnated over the past two years and are forecast to decline, which may signal weakening demand.

Conversely, the same analysis from Simply Wall St. also points to a "narrative fair value" of $108 per share. This valuation, implying a potential upside of roughly 13.8% from the December 12 closing price, is attributed to the firm's solid balance sheet and available cash following the divestiture of its financial services business.

Financial stability metrics appear robust: the market capitalization stood at approximately $2.4 billion as of December 12, the Current Ratio is a healthy 2.19, and the Altman Z-Score of 5.37 indicates low bankruptcy risk. The balance sheet confirms that cash reserves exceed total liabilities.

Forward-Looking Scenarios and Dividend

The path forward hinges on upcoming financial reports. If future revenue announcements confirm the accelerated growth and justify the raised guidance, the current valuation may be sustained. Should revenues instead show a decline, concerns about overvaluation would likely intensify.

Investors will receive a quarterly cash dividend of $0.25 per common share, payable on December 17. Ultimately, the market's continued confidence in the stock at recent price levels, or any potential valuation discounts, will be determined by subsequent updates on sales and margins.