Earnings estimates for
Ellie Mae, Inc.
) are rising after this provider of mortgage automation software
announcing impressive second quarter results, including a positive
surprise of more than 90% and a raised fiscal 2012 guidance. All
estimates for this year have moved higher in the past week,
underscoring the company's Zacks #1 Rank (Strong Buy).
Currently, the stock is trading around its 52-week high. There is
also a potential for further upside based on Ellie Mae's solid
growth projection for fiscal 2012 and the Fed's decision to make
open-market purchases of mortgage securities.
On August 1, 2012, Ellie Mae reported fiscal second quarter 2012
earnings per share (EPS) of 23 cents, beating the Zacks Consensus
Estimate by a massive 91.67%. Net sales jumped 106.0% over the
comparable prior-year quarter to $23.6 million, topping the Zacks
Consensus Estimate of $20.0 million.
The revenue improvement was mostly driven by rapid adoption of its
on-demand SaaS Encompass solutions by mortgage firms. On-demand
revenue surged 112.0% year over year. Revenues from on-premise
solutions (which include software products and license fees) surged
72.0% year over year.
Gross margin improved 820 bps from the year-ago quarter to 77.6%.
Despite a 62.3% year-over-year increase in operating expenses,
operating margin increased significantly to 22.3% from (0.6%) in
the year-ago quarter. The rise in expenses was more than offset by
a higher level of cost absorption.
For the third quarter, Ellie Mae expects revenue between $23.75
million and $24.25 million. Projected non-GAAP net income is
expected between $5.0 million and $5.4 million, while non-GAAP EPS
is seen at 18 cents to 20 cents. Expectations for sustained
business momentum and a favorable mortgage environment led the
company to raise its fiscal 2012 guidance. Ellie Mae now expects
fiscal 2012 revenue of $90 million to $91 million, up from the
previous range of $78.0 million - $79.0 million. Non-GAAP net
income is expected between $17.1 million and $18.0 million, up from
$9.6 million to $10.1 million. Non-GAAP EPS is seen between 68
cents and 72 cents (previously 42 cents - 45 cents).
Zacks Consensus Estimates Jump
All 8 estimates for the third quarter have advanced in the past 7
days.. The Zacks Consensus Estimate for the quarter has surged
233.3% to 20 cents.
The full-year 2012 estimate also went up unanimously in the past
week as all 8 estimates increased, lifting the Zacks Consensus
Estimate by 66% to 73 cents. Meanwhile, the Zacks Consensus
Estimate for 2013 is up more than 25% to 74 cents.
Valuation Looks Attractive
Ellie Mae shares are up 337.61% year to date compared with a 9.2%
increase for the S&P 500.
Shares are trading at a premium to its peers. It has a forward P/S
of 6.72 and a P/B of 6.02, against 1.95 and 1.56, respectively, for
its peers. The PEG of 1.5 is also higher than the 0.7 for the
industry. However, considering the fact that Ellie Mae has a 1-year
return on equity of 16.8%, which is well above the 4.5% of its
peers; there appears to be further upside to the shares.
Ellie Mae competes with tech behemoths such as Microsoft Corp. (
), Oracle Corp. (
) and Fiserv Inc. (
) in the mortgage-solutions arena. However, its shares have traded
at a premium to its rivals.
The significant increase in the stock price in recent months was on
account of encouraging sales trends and market share gains. The
stock is currently above its 50 and 200-day moving averages of
18.94 and 13.15, respectively.
Trading volumes are considerably lower than its peers.
Founded in 1997, California-based Ellie Mae is a provider of
end-to-end business automation solutions for residential mortgage
purposes. Mid-sized mortgage banks, mortgage brokers, and credit
unions cater to Ellie's flagship solutions to expedite mortgage
processing. The solution facilitates error-free and regulatory
compliant documentation, which speeds up origination and funding of
ELLIE MAE INC (ELLI): Free Stock Analysis
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