Pitney Bowes PBI is currently trading at a low price-to-earnings (P/E) multiple, far below the broader tech sector and S&P 500 averages. Pitney Bowes’ forward 12-month P/E ratio sits at 6.67X, significantly lower than the Zacks Computer and Technology sector’s average of 27.01X and the S&P 500’s average of 22.33X.

Pitney Bowes' price-to-sales (P/S) ratio is also on the low end, raising the question for investors whether this low valuation makes PBI a bargain.

Pitney Bowes P/E (F12M) Chart

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Despite the current low valuation, Pitney Bowes shares have surged 65.5% in the past year, outperforming the Zacks Computer and Technology sector and the broader S&P 500’s return of 27.8% and 24.7%, respectively. The robust surge in PBI’s share price and its attractive valuations could be seen as a golden opportunity for investors, given the company’s strong fundamentals and promising growth trajectory.

Pitney Bowes Price Performance Chart

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Strong Customer Base and Partners Aid PBI’s Prospects

Pitney Bowes’ extensive customer base, which includes more than 90% of Fortune 500 companies, is a testament to its market dominance. Its partnerships with industry giants, such as Amazon AMZN, eBay EBAY, Shopify and Salesforce CRM, further solidify its position in the global logistics and technology space.

For example, Pitney Bowes provides cross-border e-commerce logistics services to eBay in the U.S. and U.K. markets. Its longstanding partnership with Amazon Web Services (“AWS”) and membership in the AWS Solution Provider Network highlights its ability to integrate seamlessly with cutting-edge technologies.

PBI and Salesforce are connected through the latter’s Shipping API Partner Program. These collaborations not only diversify its revenue streams but also position it for long-term growth.

PBI Divests Its GEC Business to Accelerate Growth

Pitney Bowes has long grappled with the underperformance of its Global Ecommerce (GEC) segment. PBI had made significant investments, including the acquisitions of Borderfree in 2015 and Newgistics in 2017 to bolster the GEC business. The segment initially gained traction during the COVID-19 pandemic. However, after the pandemic, declining package volumes and aggressive discounting by competitors dragged down its profitability.

Recognizing GEC as a liability, Pitney Bowes is now divesting this segment, a move that could transform its financial trajectory. The sale to Hilco Global, expected to close in early 2025, is projected to boost annual earnings by $136 million. This strategic exit allows PBI to focus on its higher-margin businesses, bolstering profitability and enabling a leaner operational structure.

PBI Demonstrates Robust Financial Performance

Pitney Bowes’ efforts to address its substantial long-term debt and improve liquidity are already bearing fruit. By repatriating $117 million from overseas operations, the company has amassed more than $100 million in excess cash, which will support debt reduction and enhance its financial flexibility.

Simultaneously, Pitney Bowes is making significant progress in cost-cutting initiatives. From the beginning of 2024 through the third quarter, the company achieved $90 million in annualized savings from its SendTech and Presort businesses. Management expects total cost savings for the year to be between $150 million and $170 million, underscoring its commitment to driving operational efficiency.

PBI is demonstrating solid financial recovery as well. The company has witnessed strong improvement in non-GAAP operating profit and margin in all three quarters of 2024. In the third quarter of 2024, adjusted operating profit grew 22.6% year over year to $103 million, while margin expanded 490 basis points to 22.2%. The company expects its 2024 earnings before interest and tax to be between $355 million and $360 million, a strong indication of its improving profitability.

Analysts are also optimistic about Pitney Bowes’ earnings growth potential. The Zacks Consensus Estimate for 2025 earnings has moved up by 3 cents to $1.08 in the past 30 days, indicating 184% year-over-year growth. The stock has surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 105%.

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Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Conclusion: Buy PBI Stock Now

Pitney Bowes is at an inflection point, with its strategic realignment and cost-cutting initiatives paving the way for sustainable growth. The divestiture of the GEC segment, coupled with financial discipline and robust partnerships, positions the company for long-term profitability.

Given its strong financial recovery, undervalued stock price and promising growth outlook, PBI offers a compelling investment opportunity. Investors looking to capitalize on this transformation should consider adding the stock to their portfolios now. PBI currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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