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Why Dot Hill Systems Corp. Shares Crashed

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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 Dot Hill Systems  (NASDAQ: HILL  ) are trading 13% lower today after the company reported first-quarter earnings that came with some underwhelming forward guidance.

So what: Dot Hill's revenue rose 9% year over year to reach $48.9 million, and the company's adjusted earnings came in at $0.02 per share. Both figures beat Wall Street's expectations of $48.5 million in revenue and $0.01 in EPS. Looking ahead, Dot Hill now expects revenue to range from $49 million to $54 million -- slightly below Wall Street's $52.7 million consensus -- and anticipates producing between $0.01 and $0.04 in adjusted EPS, which is also a hair below Wall Street's expectations of $0.03 in EPS.

Now what: Dot Hill's share price had gotten rather ahead of the company's fundamentals over the past few months -- while it recorded a trailing 12-month GAAP profit for the first time since the recession at the end of last year, its free cash flow is barely changed from where it was years ago, and Dot Hill's revenue has yet to recover to highs set back in 2009. The company's shift to a new business will take time to play out, but it doesn't appear that Dot Hill's shares are cheap enough, even after today's pop, to justify anticipated mediocre growth rates going forward.

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Alex Planes

Alex Planes specializes in the deep analysis of tech, energy, and retail companies, with a particular focus on the ways new or proposed technologies can (and will) shape the future. He is also a dedicated student of financial and business history, often drawing on major events from the past to help readers better understand what's happening today and what might happen tomorrow.

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Related Tickers

8/31/2015 3:59 PM
HILL $9.67 Up +0.01 +0.05%
Dot Hill Systems C… CAPS Rating: **