) Tax season is over, but analysts are moving estimates lower for
this company despite an outsized recent beat. It is a Zacks Rank #5
(Strong Sell). It is the Bear of the Day.
Tax Season is Over
A lot of people might focus on the TaxAct side of the business and
after Q1 and Q2, the revenues from that unit will almost always
drop precipitously. That is one reason analyst might have reined in
estimates, but this unit is growing on a year over year basis.
I should disclose at this time that I am a TaxAct subscriber / user
and I am very pleased with this service. I know that I originally
was attracted by the low rate for the service, but I have been a
customer now for the last three years. I expect to remain a
customer over the next several years as well.
Blucora is engaged in providing internet-based solutions for
consumers and business partners. It owns and operates two Internet
businesses. Blucora's InfoSpace business provides online search and
monetization solutions. The Company's TaxACT business provides
online tax preparation solutions to consumers and professional
preparers. Blucora was formerly known as InfoSpace and is
headquartered in Bellevue, Washington.
Good Earnings History
Looking to the earnings history, I see a company that has gotten it
right over the last year or even more. They have posted six
straight positive earnings surprises. So over the last year and a
half, management has done its job of guiding Wall Street to have
Infospace vs TaxAct
The most recent earnings report showed that the company saw solid
growth from each of its two main service areas. $100M in search
revenue was a solid gain from $75M in the year ago period. Tax
Preparation revenue of $64M was a huge increase form $40M in the
year ago period.
Earnings Estimates Tick Lower
Of late, earnings estimates have declined. The Zacks Consensus
Estimate for 2013 has slipped from $1.02 in March to $0.96 in April
down to $0.76 in May. That sort of decline is something makes a lot
of people take notice is and is the major reason this stock has its
low Zack Rank.
The same could be said of the 2014 Zacks Consensus Estimate as it
fell from $1.54 in March, to $1.34 in April down to $1.03 in May.
Earnings estimate revisions are the largest component of the Zacks
Rank that can influence a change in rank.
The valuation picture for BCOR is slightly mixed. The trailing PE
of 11x shows the company trading at a discount to the industry
average of 21x. The forward PE of 24x, however shows the company
trading at a premium to the 19x industry average. The more
conservative measure of price to book shows the company at 1.7x
with the industry average of 4.5x.
The price and consensus chart shows a disturbing trend in earnings
estimates. The stock has moved up through the changes in earnings
estimates, and given that there was $0.40 beat in a recent quarter
there could be a high degree of "noise" in the earnings. That noise
may end up clouding the picture in what is otherwise a decent
Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor
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