The reason the price is "cheap" is that the EPS now is about a 1/3 of what it was in 2008, in fact the forecast EPS for 2012 is 11 cents which is the same as it was back in 2005.
To get a SP of $2, you will need a P/E of about 20 for a company that has shown no real growth in EPS in 7 years. Not saying it wont happen but I wouldn't be looking at fundamentals on this one.
First up, I work for OKN and have recently bought shares... so no doubt I have a slightly rose coloured view of the world, so DYOR
Not sure where you get EPS of 11c for FY12, the reported first half results were 7c and the earnings guidance released recently said that 2nd half was expected to be about the same, so FY12 earnings is expected to be about 14c per share... it's also worth noting, that the first half figure included a one off payment of approx 2c per share from the result of ending legal action that had been going for a couple of years... so the earnings from regular business has improved from 5c in the first half, to about 7c in the 2nd half (which is consistent with my observations on the ground - first half was very flat, utilisation rate was very low across most locations, but 2nd half has been very good - so don't expect that rate of growth to continue, there are some abnormalities in there... all things being equal I would estimate FY13 earnings to be 13-14c at this point).
So a little info on what's been happening in the last 4 or so years...
Coming up to the GFC, Oakton was well and truly in growth mode - they took over Acumen Alliance in 2006 that effectively became an instant Canberra office, giving us exposure to the Federal Government. The hiring policy was very aggressive - it was hire in advance, so if they found someone with a good skill set that we were a little thin in, they would hire right away and then try and find a project to place them in.
When the GFC hit, things obviously changed. There was quite a bit of debt on the books still from the Acumen takeover, so priority one was to repay that debt - that meant suspending dividends and putting all earnings into paying off the debt (which was achieved a couple of years ago - dividends have now been reinstated). The hiring policy also changed to hire when needed, i.e. when a project needed a skill set we didn't have, only then would they look to hire.
We are slowly starting to see some signs of growth again - we are still hiring as needed, but one reason the first half results were impacted was that even when the market was flat (and it was very flat), they held on to just about everyone - so each location would have had plenty of people sitting on the bench, getting paid, but earning no money... that decision obviously helped the 2nd half results where most of those people have been flat out on client projects. There is also the possibility of expanding into the Perth market - with a couple of projects starting there this year and the possibility of expanding that further.
Also during the past couple of years OKN has had a branding refresh and has replaced many of their core systems... so that time of pulling back and refocusing has been used quite well and I believe we are well placed to move forward from this point.
...so, fundamentally - going on an EPS of say 13c which should be a reasonably conservative estimate for the next two years (if we can get a few more projects off the ground in Perth and establish a small office over there and the market stays about the level during the 2nd half of FY12, then it could easily be higher than that), then a P/E of 10 - 12, gives a range of $1.30-$1.56, which is what my target range is for the next 12 months, and that should also include a dividend of about 10c per year... so yeah, I think the price does look very cheap at this point (and the buyers have started to show up now too).
Should be an interesting 12 months for OKN I reckon.