What happened
Shares of Limelight Networks (EGIO -5.28%) took the stage Friday, soaring as much as 28% higher thanks to a strong earnings report. Shares are up 19% as of 3:05 p.m. EDT.
So what
In the first quarter of 2018, the content delivery specialist saw top-line sales rise 17% year over year to land at $52.1 million. Further down the income statement, adjusted earnings tripled to $0.06 per share. Analysts had been looking for earnings to stay flat compared to the year-ago period, based on sales in the neighborhood of $48 million.
Some companies grow their revenues by offering steep discounts to prospective clients, but Limelight is going the other way. Gross margins expanded from 47.3% to 51.2%, year over year, without weighing down the company's top-line growth.
Image source: Getty Images.
Now what
Management raised their revenue and earnings targets for the full year and outlined an even brighter 2019. Legal charges have been weighing down Limelight's bottom line for a long time, led by a 12-quarter series of payments to rival Akamai Technologies from a bitter patent infringement lawsuit. Those predictable expenses will end five quarters from now, removing a cool $4.5 million expense from each quarterly report.
On top of that, Limelight responded to financial pressures by refocusing on stronger service quality and better customer service, winning business the old-fashioned way.
At this point, Limelight's share prices have doubled over the last 52 weeks, but the stock still looks affordable based on a P/E ratio of just 22.5 times forward earnings and a price-to-book valuation of 3.1. These are deep-discount metrics for a company executing a strong turnaround in real time. Today's price jump makes all kinds of sense.
