The 10-second takeaway
For the quarter ended Dec. 31 (Q4), Digital Generation missed estimates on revenues and missed expectations on earnings per share.
Compared to the prior-year quarter, revenue grew significantly, and GAAP earnings per share shrank significantly.
Gross margins grew, operating margins shrank, and net margins dropped.
Digital Generation reported revenue of $108.3 million. The seven analysts polled by S&P Capital IQ predicted a top line of $117.9 million on the same basis. GAAP reported sales were 42% higher than the prior-year quarter's $76.1 million.
Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.
Non-GAAP EPS came in at $0.40. The seven earnings estimates compiled by S&P Capital IQ forecast $0.63 per share on the same basis. GAAP EPS of $0.16 for Q4 were 69% lower than the prior-year quarter's $0.51 per share.
Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.
For the quarter, gross margin was 70.5%, 160 basis points better than the prior-year quarter. Operating margin was 23.3%, 1,580 basis points worse than the prior-year quarter. Net margin was 4.1%, 1,510 basis points worse than the prior-year quarter.
Next quarter's average estimate for revenue is $92.1 million. On the bottom line, the average EPS estimate is $0.28.
Next year's average estimate for revenue is $416.6 million. The average EPS estimate is $1.65.
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 250 members rating the stock outperform and 11 members rating it underperform. Among 69 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 66 give Digital Generation a green thumbs-up, and three give it a red thumbs-down.
Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Digital Generation is outperform, with an average price target of $26.86.
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Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.