Why SolarWinds Shares Plunged

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 network management software maker SolarWinds (UNKNOWN: SWI.DL  ) dropped 15% today after the company released earnings.

So what: Revenue jumped 22% to $72.9 million and adjusted earnings per share came in at $0.30 per share in the first quarter. The problem is that analysts expected revenue of $75.6 million and earnings per share of $0.37. To make matters worse, management said it expects second-quarter revenue of $77.8 million to $78.8 million and earnings of $0.37 to $0.38 per share, both lower than expected.

Now what: The stock's forward P/E ratio is 23, indicating that investors are expecting a lot of growth in 2013. If the company doesn't grow as expected, the stock can be crushed quickly, like it was today. Just based on price I don't think the stock is a great buy today, although I'd revisit this if the stock continues to move lower in coming weeks, because the company is still growing at a rapid rate.

Interested in more info on SolarWinds? Add it to your watchlist by clicking here.

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Related Tickers

12/31/1969 7:00 PM
SWI.DL $0.00 Down +0.00 +0.00%
SolarWinds CAPS Rating: ****