Analyst: Watson Wyatt Ripe for Picking

September 20, 2005 ( - Analyst Lenny Dykstra on says Watson Wyatt & Co.'s stock is "too cheap" and "Either the company persuades investors to make this number higher or it gets acquired."

Dykstra says the consulting firm’s stock is at 17 times trailing earnings.   He believes Watson’s rival Hewitt Associates could be a potential buyer, he said on points out that Hewitt has made more than $1 billion in acquisitions in the past few years.   It bought UK company Bacon & Woodrow for $259 million in 2002 (See  Hewitt Bacon and Woodrow Join Forces ), and last year it bought Exult, a human resources firm (See  Hewitt, Exult Shareholders Make it Official ), for $776 million.

Hewitt has not made mention of any acquisitions. points out that last month the company said human resources business process outsourcing would be the “major driver in the growth of our revenue and profits over the next several years”. said Dykstra cited the consistency of Watson’s numbers, its zero debt, forward price/earnings ratio of 14.36, and return on equity of 21.44%, making the company attractive for purchase.