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Why SS&C Technologies Shares Fizzled Then Rebounded

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of software products supplier to the financial sector SS&C Technologies (Nasdaq: SSNC  ) dipped as much as 12% this morning before paring about two-thirds of its losses after reporting first-quarter results.

So what: For the quarter, SS&C noted a 5.2% jump in revenue to $93.7 million and an adjusted EPS profit of $0.28. If you can get past the company's confusing GAAP versus non-GAAP discussion in its report, you'll realize its EPS met expectations while sales fell slightly short of the consensus. SS&C blamed weak license revenue for the sales weakness. The real news that had the software company diving on the open was its second-quarter and full-year sales guidance. Based on the midpoint of the sales range the company provided, both the second quarter and full year fell about 2%-3% below Wall Street's expectations.

Now what: License revenue is where the fat margins are, so I wouldn't exactly say I'm feeling particularly optimistic about SS&C's near-term outlook. With the company's earnings growth slowing, I'm not sure it really should be commanding a forward multiple of 17 or be trading at nearly five times sales. In short, wait for SS&C's license revenue to improve before considering this a safe investment.

Craving more input? Start by adding SS&C Technologies to your free and personalized watchlist so you can keep up on the latest news with the company.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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5/27/2016 12:11 PM
SSNC $61.30 Up +0.20 +0.33%
SS&C Technologies CAPS Rating: ****