Stephens Inc. Analyst John Campbell says he sees a significant opportunity for NIC Inc. (EGOV) if the company is successfully able to penetrate the federal government market. He says the company has found a good niche in state government, and has an impressive ROIC around 30%.
“They set up a large-scale enterprise-level agreement with the state and essentially do all of the services online,” Campbell says. “EGOV is kind of behind the scenes, and their focus is to allow the state to get all the credit with its citizens. For instance, if you were to go to Texas.gov or something like that from a state level, it would look like the state’s branded website, but it’s all basically EGOV on the back end.”
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EGOV’s management believes it can roll up every state in the U.S., Campbell says. He says the team is looking to go upstream into the federal side, which would really open up runways for future growth.
“They’ve got one federal contract right now with the Motor Carrier Safety Administration to do some driver history records, and they want to continue to go upstream to the federal side because the economics are better,” Campbell says. “There’s a lot more opportunity because obviously at the state level, you are capped by the amount of states.”
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