) has been divesting non-core assets in order to focus on its core
business. Most recently, this provider of digital entertainment
technology solutions announced its plan to sell the Rovi
Entertainment Store, leading the Zacks #1 Rank (Strong Buy) to
raise its fiscal 2012 earnings guidance.
ROVI remains significantly undervalued, with a forward
price-to-earnings (P/E) multiple of just 10.8 and low price-to-book
(P/B) multiple of 1.2.
Impressive Q3 for Rovi
In November, Rovi announced third quarter earnings of 35 cents per
share, comfortably surpassing the Zacks Consensus Estimate by
52.2%. Revenue of $169.6 million also surpassed expectations.
Following the announcement of the sale of the Rovi Entertainment
Store (which was classified as discontinued operations), the
company restated its results for the first three quarters of 2012.
As per the restatement, Rovi generated revenue of $165.6 million in
the third quarter of 2012. Earnings (excluding equity compensation
and other one time items) were 56 cents per share in the reported
Rovi trimmed its revenue guidance for 2012. The company now expects
revenue between $645.0 million and $650.0 million, compared to the
earlier range of $660.0 million to $670.0 million.
However, the earnings outlook improved. Product rationalization and
operational efficiencies are helping cost control and margin
expansion at Rovi. The company now expects earnings between $2.05
and $2.10 per share, versus the previously guided range of $1.80 to
$1.90 per share.
Earnings Estimates Moving Up
The Zacks Consensus Estimate for 2012 jumped 24% over the last 90
days to $1.44 per share. Specifically, earnings estimates advanced
nearly 11% in just the last 7 days following the announcement of
the Entertainment Store sale.
Meanwhile, the Zacks Consensus Estimate for fiscal 2013 increased
13% over the last 90 days to $1.56, including a gain of more than
6% in 7 days.
In addition to low P/E and P/B multiples, the stock looks
attractive even on a price-to-sales (P/S) basis. Its P/S multiple
is 2.5, much lower than the industry average of 4.3. Moreover,
Rovi's PEG ratio of just 0.86 indicates that the stock is
undervalued given the expected growth of 12.5%.
Rovi Corp. provides solutions that guide users to different facets
of digital entertainment. Rovi's solutions help users to discover
digital content related to television, movies, music, books and
games. The company also provides Video delivery and advertising
solutions. This $1.72 billion company primarily serves consumer
electronics manufacturers and different service providers (cable,
satellite, telecommunications, mobile and Internet companies). Rovi
faces significant competition from Yahoo! (
) and Google (
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