Quest Software Earnings Preview

Quest Software (Nasdaq: QSFT) hasn't been able to establish an earnings trend, bouncing between beating and falling short of estimates during the past fiscal year. The company will unveil its latest earnings Tuesday. Quest Software designs, develops, markets, distributes and supports enterprise systems management software products.

What analysts say:

• Buy, sell, or hold?: Analysts strongly back Quest Software, with three of five rating it a buy and the remainder rating it a hold. Analysts don't like Quest Software as much as competitor Compuware overall. Wall Street has warmed to the stock over the past three months, with analysts increasing their endorsement from hold to moderate buy.
• Revenue forecasts: On average, analysts predict $202.2 million in revenue this quarter. That would represent a rise of 8.6% from the year-ago quarter.
• Wall Street earnings expectations: The average analyst estimate is earnings of $0.19 per share. Estimates range from $0.18 to $0.20.

What our community says:
CAPS All-Stars are solidly behind the stock with 97.6% awarding it an "outperform" rating. The community at large backs the All-Stars with 93.5% granting it a rating of "outperform." Fools are gung-ho about Quest Software, though the message boards have been quiet lately with only 27 posts in the past 30 days. Quest Software has a bullish CAPS rating of five out of five stars that is about on par with the Fool community assessment.

Management:
Quest Software's profit has risen year over year by an average of more than twofold. Revenue has now gone up for three straight quarters. The company's gross margin shrank by 2.3 percentage points in the last quarter. Revenue rose 9.9% while cost of sales rose 30.2% to $27.4 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

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