Longtime Linux platform leader Red Hat (NYSE: RHT ) will don a fresh fedora on Thursday night to report its third-quarter 2008 results. Flip back to the fashion notes from last quarter, along with a rundown of the numbers. Then get back here to get fitted for new headgear.
What Fools say:
Here's how Red Hat's Motley Fool CAPS scoring rates against some of its peers and competitors:
|
Market Cap (millions)
|
Trailing P/E Ratio
|
CAPS Rating
|
|
Microsoft (Nasdaq: MSFT )
|
$322,770
|
22.6
|
***
|
|
Oracle (Nasdaq: ORCL )
|
$106,220
|
24.5
|
****
|
|
Sun Microsystems (Nasdaq: JAVA )
|
$15,590
|
27.6
|
***
|
|
Red Hat
|
$3,540
|
45.8
|
**
|
|
Novell (Nasdaq: NOVL )
|
$2,360
|
N/A
|
**
|
Data taken from Motley Fool CAPS on Dec. 19.
Red Hat is having a hard time convincing our CAPS players that it is a viable investment. If you like Google (Nasdaq: GOOG ) and Apple (Nasdaq: AAPL ) , you're also likely to enjoy the story of Red Hat's growth. Conversely, those who hate Mountain View's and Cupertino's finest don't think much of the Raleigh upstart, either.
Either way, it's not a very talkative bunch. One helpful user liked the company three months ago: "Great sales and earnings growth. Great balance sheet. Oracle has proven to be inept at stealing market share and Microsoft has been nailed by the EU." The bears have been silent since July.
The lack of healthy discussion here is unnerving. Maybe it's time for you to go out and break the silence.
What management does:
Sales and gross margins are on the rise, but Red Hat keeps scaling up its operational staff, so the bottom-line results don't always follow suit. It's a sound investment, though -- I expect this quarter's R&D expenses to be nearly three times the $9.6 million it was two short years ago.
|
Margins
|
5/2006
|
8/2006
|
11/2006
|
2/2007
|
5/2007
|
8/2007
|
|
Gross
|
83.6%
|
83.9%
|
83.8%
|
83.8%
|
84.0%
|
84.2%
|
|
Operating
|
20.9%
|
18.1%
|
15.0%
|
13.1%
|
12.5%
|
13.6%
|
|
Net
|
26.9%
|
22.4%
|
18.1%
|
15.0%
|
14.3%
|
15.0%
|
|
FCF/Revenue
|
61.3%
|
54.5%
|
50.8%
|
44.7%
|
37.6%
|
35.8%
|
|
Y-O-Y Growth
|
5/2006
|
8/2006
|
11/2006
|
2/2007
|
5/2007
|
8/2007
|
|
Revenue
|
39.9%
|
42.8%
|
43.2%
|
43.9%
|
44.4%
|
38.0%
|
|
Earnings
|
72.6%
|
45.3%
|
3.9%
|
(24.8%)
|
(23.0%)
|
(7.7%)
|
Data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.
One Fool says:
The stock chart here looks like Novell's -- except it's magnified by higher volatility. The twosome have common goals in the market for Linux software, but Novell is buffered by the slowly decaying NetWare product line.
You could argue that a volatile stock leads to sleepless nights for us investors, and buy some Novell stock. Or, you can look at Mr. Market's wild mood swings and conclude that buying Red Hat on an especially moody dip makes more sense in the long run. Either way, I think that both companies will eventually do well on the backs of Linux going mainstream in both corporate and consumer markets. Just pick your poison, and keep a barf bag handy for the roller-coaster ride that's ahead.
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