Quest Software Earnings Preview

Quest Software (Nasdaq: QSFT  ) hasn't been able to establish an earnings trend, bouncing between beating and falling short of estimates during the past fiscal year. The company will unveil its latest earnings Tuesday. Quest Software designs, develops, markets, distributes, and supports enterprise systems management software products. It markets products related to application management and database management.

What analysts say:

• Buy, sell, or hold?: Analysts think investors should stand pat on Quest Software with four of seven analysts rating it hold. Analysts don't like Quest Software as much as competitor Compuware overall. Five out of five analysts rate Compuware a buy compared with three of seven for Quest Software.
• Revenue Forecasts: On average, analysts predict $243.7 million in revenue this quarter. That would represent a rise of 12.4% from the year-ago quarter.
• Wall Street Earnings Expectations: The average analyst estimate is earnings of $0.46 per share. Estimates range from $0.44 to $0.48.

What our community says:
CAPS All-Stars are strongly supporting the stock, with 97.2% granting it an "outperform" rating. The community at large is in line with the All-Stars, with 93.4% assigning it a rating of "outperform." Fools are bullish on Quest Software, though the message boards have been quiet lately with only 27 posts in the past 30 days. Quest Software has a bullish CAPS rating of five out of five stars that is about on par with the Fool community assessment.

Management:
Quest Software's income has fallen year-over-year by an average of 41.2% over the past five quarters. Revenue has now gone up for three straight quarters. The company's gross margin shrank by 2.1 percentage points in the last quarter. Revenue rose 14.2% while cost of sales rose 33.8% to $31.4 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins serve as an illustration of how efficiently a company captures portions of sales dollars. Quest Software has seen decreasing net margins year-over-year for the last four quarters. Net margins reflect what percentage of each dollar earned by the company becomes profit. Here are Quest Software's reported margins for the last four quarters:

Quarter	Q3	Q2	Q1	Q4
Gross Margin	85.7%	85%	85.4%	87.9%
Operating Margin	13.6%	5%	2.9%	14.4%
Net Margin	9.7%	3.1%	1.9%	17.1%

One final thing: If you want to keep tabs on Quest Software movements, and for more analysis on the company, make sure you add it to your watchlist.

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Earnings estimates provided by Zacks.