Agilysys shares skyrocketed on Tuesday morning
Shares of Agilysys (AGYS -0.54%) skyrocketed on Tuesday morning. The stock was up 23.4% just before noon ET, boosted by a robust second-quarter earnings report.
How the company exceeded analyst expectations
Your average Wall Street analyst had expected Agilysys to report adjusted earnings near $0.19 per share and sales in the neighborhood of $56.8 million. But the hospitality technology expert didn't stop there. Earnings rose 4% year over year to $0.25 per share. Top-line sales increased by 23%, landing at $58.6 million.
Management also raised the full-year revenue outlook by $4 million, suggesting solid growth in the back half of the company's fiscal year. Subscription revenues, in particular, are accelerating faster than expected at the cost of slightly lower profit margins.
Agilysys' outlook: What investors should watch
In the earnings call, Agilysys CEO Ramesh Srinivasan highlighted strong growth in hotels, cruise ships, and non-gaming resorts. These target markets are especially interesting because Agilysys has a modest market share and plenty of room for future growth. Customers are embracing the company's full-featured and cloud-based hospitality management software after a slow period when Agilysys was reengineering its solutions.
"The hospitality industry is global, huge and has a high need for technology and innovation to help with growing needs, to improve operational efficiencies, enable ease of use for staff users and help create far better guest experiences than are possible today," Srinivasan said.
This was the seventh quarter in a row of results exceeding analyst projections across the board. As a result, the stock has gained a cool 50% in 52 weeks and tripled in three years. Agilysys is on a roll, financially speaking. At the same time, investor expectations run sky-high. The stock is trading at 170 times trailing earnings and 83 times free cash flows. Inspiring an overnight jump of 23% under these conditions is an impressive feat.
Agilysys is a high-octane growth stock to keep on your radar. However, I'd suggest nibbling gently at it due to the lofty valuation.
