CommVault Systems Inc.
) delivered a 38.1% positive surprise in its fiscal second quarter,
which convinced most analysts to raise their estimates. This Zacks
#1 Rank (Strong Buy) provider of Enterprise Backup/Recovery
software has a long-term projected growth rate of 25.0%.
Strong Second Quarter
On October 29, CommVault Systems reported that fiscal second
quarter earnings per share surged 70.6% year over year to 29 cents,
which exceeded the Zacks Consensus Estimate by 38.1%. The strong
growth was primarily driven by the improving operating margin in
Revenue jumped 21.2% from the prior-year quarter to $118.2 million,
slightly above the Zacks Consensus Estimate of $115.0 million. The
better-than-expected growth was driven by solid performances from
software (up 23.8%) and services (up 18.8%).
Higher revenues and stringent cost control helped the operating
margin to expand 550 basis points to 18.9% in the reported quarter.
Outlook Remains Positive
CommVault Systems expects the positive first-half momentum to
continue in the second half of fiscal 2013. Despite an uncertain
macro environment, the company is confident that it will deliver
strong second half results on the basis of increasing demand from
enterprise and federal sectors, as well as continuous cost control
Earnings Estimates Move Higher
It is noteworthy that most analysts raised their forward estimates
for both 2013 and 2014 over the last 30 days. For 2013, the Zacks
Consensus Estimate increased 4.4% to 94 cents as 4 of 6 estimates
were revised upward. For 2014, the Zacks Consensus Estimate of
$1.06 improved 3.8% as 3 estimates out of 5 moved higher.
Currently, CommVault Systems is trading at a premium to most of its
peers based on P/E, P/S and P/B. The premium valuation seems
justified given the company's solid earnings growth prospects. Its
earnings growth expectation of 25.0% over the next five years
compares favorably with the industry average of 17.8%, indicating
room for further significant expansion. Moreover, its return on
equity (ROE) of 17.1% is higher than the industry average of 11.5%.
Chart Shows Growth Potential
The 12-month earnings per share (EPS) chart clearly shows that
share prices have increased at a higher pace than earnings over the
last few years.
Currently, its share price is hovering around $63.00. The consensus
estimates for 2013 and 2014 are trending upward. The estimate
revision graph indicates a slow but steady upward trend through
fiscal 2015. As illustrated in the chart below, share prices should
increase at a similar or higher pace than the estimate revision
Incorporated in 1996, CommVault Systems Inc. develops software that
primarily helps enterprises to manage data and information. Through
its flagship Simpana brand, the company delivers different data
management activities including backup and recovery capabilities
for both onsite and cloud environments.
Oceanport, New Jersey-based CommVault has a market capital of $2.87
billion and competes with EMC Corp. (
), Hewlett-Packard (
), IBM (
) and Symantec Corp. (
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