Guidance Software Inc.
) reported third-quarter earnings per share that surpassed the
Zacks Consensus Estimate by more than 40%, marking the third
positive earnings surprise in the past 4 quarters. Given these
factors and a year-to-date return of 63.3%, this Zacks #1 Rank
(Strong Buy) provider of digital investigative solutions looks to
be an attractive investment opportunity for growth-seeking
Strong Third Quarter
On November 1, Guidance Software reported third quarter earnings of
10 cents per share, beating the Zacks Consensus Estimate of 7 cents
by 42.9% and the year-ago earnings of 3 cents by 233.3%.
Revenue jumped 34.1% from the year-ago quarter to $36.6 million,
marginally surpassing the Zacks Consensus Estimate. Product revenue
(48% of total revenue) increased 17.4% to $17.4 million; services
and maintenance revenue (44.5% of total revenue) surged 29.4% to
$16.1 million; and subscription revenue (7.5% of total revenue) was
Operating profit jumped 93% year over year to $4.1 million.
Operating margin expanded 340 basis points (bps) to 11.1%,
primarily attributable to top-line growth.
During the quarter, Guidance Software added 65 new EnCase
Enterprise customers and 20 new customers of EnCase eDiscovery.
For 2012, the company expects non-GAAP revenue to increase 23% to
25% over the previous year to between $129.0 million and $131.0
million. Pre-tax earnings are expected to be between 37 cents and
41 cents per share.
Earnings Estimates Move Higher
The Zacks Consensus Estimate for 2012 remains unchanged at 19
cents, representing 280% year-over-year growth. Over the last 30
days, the Zacks Consensus Estimate for 2013 improved 12.0% to 28
cents, representing a year over year improvement of 47.4%.
Currently, Guidance Software is trading at a premium to its peers
with respect to P/E (55.3x versus 17.2x), P/S (2.1x versus 4.0x)
and P/B (7.4x versus 3.9x). Furthermore, the company's Return on
Investment (ROI) of 12.7% is much better than the industry average
Historically, Guidance Software's price has shown positive
correlation with earnings growth. The uptrend in earnings estimates
should encourage investors as the stock is likely to follow that
Pasadena, California-based Guidance Software offers digital
investigative solutions to corporations and government agencies.
Through its EnCase platform, organizations can search, collect and
analyze electronically stored information to address human
resources problems, litigations, allegations of fraud, suspicious
network endpoint activity and defend their data assets.
Guidance Software faces significant competition from EMC Corp. (
), Autonomy, Navigant, Iron Mountain (
) and McAfee in its various operational markets. The company has a
market capitalization of $261.37 million.
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