Daktronics (DAKT 2.77%) stock, which makes jumbotron-sized electronic scoreboards and displays for convention centers and sports stadiums, tumbled 11.3% through 9:50 a.m. ET Wednesday after reporting its first earnings miss in a year this morning.
Analysts had forecast a $0.13 per share profit for Daktronics in its fiscal Q3 2026, but the company actually earned only $0.09 per share (adjusted for one-time items) on sales of $181.9 million.
Image source: Getty Images.
Daktronics Q4 earnings
Investors seem upset by the earnings, but the numbers weren't objectively bad. Daktronics grew its sales 21.6% year over year in Q3, and earnings were at least positive this year, versus last year's Q3 loss.
Earnings calculated under generally accepted accounting principles (GAAP) were less than the adjusted number noted above -- only $0.06 per share. One year ago, however, Daktronics reported losses of $0.36 per share.
On the cash flow statement, Daktronics shows $43.9 million in free cash flow generated so far this year. That's down year over year, but ahead of reported earnings. At its current run rate, Daktronics is on course to generate about $58.5 million in cash profit this year.
NASDAQ: DAKT
Key Data Points
Is Daktronics stock a sell?
Valued at $1.1 billion, Daktronics stock therefore trades at a price-to-free cash flow ratio of about 19 based on current-year FCF. The stock would therefore need to be growing profits at about 20% annually to make it a "buy" in my book. Is that likely?
Probably not. First, sales growth of better than 20% didn't translate into an earnings improvement last quarter. Second, CEO Ramesh Jayaraman noted that new orders grew less than 8% in Q3, implying a slowdown from the quarter's 21.6% sales growth rate.
While a fine company, Daktronics stock looks overvalued to me, and I'd sell it.
