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's happening: Shares of Ellie Mae (ELLI) rose as much as 19% on Friday morning after the company announced blowout first-quarter results and raised guidance for the full year much above Wall Street's expectations.
Why it's happening: Here's how the headline numbers shook out:
|
|
Actual |
Analysts' Consensus Estimate |
|---|---|---|
|
Q1 Revenues – BEAT % Surprise |
$54.2 million +16% |
$46.6 million |
|
Q1 Earnings per Share – BEAT % Surprise |
$0.33 +65% |
$0.20 |
|
|
Guidance |
Analysts' Consensus Estimate |
|
2015 Revenues |
$223 million-$226 million |
$206.4 million |
|
2015 Earnings-per-share* |
$1.09-$1.13 |
$0.93 |
*Adjusted. Source: Thomson Financial Network, Ellie Mae.
Multinationals in the S&P 500 have been pointing to the strong dollar to explain revenue shortfalls, but there is no such headwind for residential mortgage software provider Ellie Mae, which is focused on the U.S. market. Here's how CEO Jonathan Corr explained the company's stellar revenue growth in the first quarter:
Not only did we see origination volumes increased in the first quarter above initial industry expectations, but our customers also significantly outpaced the mortgage industry as a whole... At the same time, we expanded our user base and we continue to drive customer adoption across our product portfolio in the Ellie Mae Network. Combined, these factors helped grow average revenue per user by 38%.
(For more granularity on Ellie Mae's results, let me refer you to my Foolish colleague Dan Caplinger's analysis.)
No doubt about it, Ellie Mae is a growth business and, as such, it is reinvesting significant amounts of capital in the business. In the first quarter alone, the company invested $16 million in capital projects -– roughly equal to its adjusted EBITDA -- with capital expenditures expected at between $40 million and $45 million for the full year.
The company's results fuel investor expectations for future growth and the shares trade at premium multiples: 52 times forward earnings-per-share and 40 times cash flow, per research firm Morningstar. That needn't be a problem, as the company is growing at a rapid clip (and, crucially, that growth is profitable). As always, investors ought to remain focused on the long term to allow Ellie Mae's full promise to play out.
