The 10-second takeaway
For the quarter ended March 31 (Q1), Rosetta Stone beat expectations on revenue and exceeded expectations on earnings per share.
Compared to the prior-year quarter, revenue improved significantly and GAAP loss per share dropped.
Margins expanded across the board.
Rosetta Stone tallied revenue of $69.4 million. The four analysts polled by S&P Capital IQ expected a top line of $60.5 million on the same basis. GAAP reported sales were 22% higher than the prior-year quarter's $57.0 million.
Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.
EPS came in at -$0.09. The five earnings estimates compiled by S&P Capital IQ anticipated -$0.41 per share. GAAP EPS were -$0.09 for Q1 versus -$0.45 per share for the prior-year quarter.
Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.
For the quarter, gross margin was 80.6%, 70 basis points better than the prior-year quarter. Operating margin was -3.4%, 2,050 basis points better than the prior-year quarter. Net margin was -2.7%, 1,360 basis points better than the prior-year quarter.
Next quarter's average estimate for revenue is $67.6 million. On the bottom line, the average EPS estimate is -$0.16.
Next year's average estimate for revenue is $277.7 million. The average EPS estimate is -$0.27.
The stock has a three-star rating (out of five) at Motley Fool CAPS, with 702 members out of 792 rating the stock outperform, and 90 members rating it underperform. Among 169 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 150 give Rosetta Stone a green thumbs-up, and 19 give it a red thumbs-down.
Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Rosetta Stone is hold, with an average price target of $8.67.
Over the decades, small-cap stocks like Rosetta Stone have provided market-beating returns, provided they're value-priced and have solid businesses. Read about a pair of companies with a lock on their markets in "Too Small to Fail: Two Small Caps the Government Won't Let Go Broke." Click here for instant access to this free report.
- Add Rosetta Stone to My Watchlist.
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. The Motley Fool owns shares of Rosetta Stone. Motley Fool newsletter services have recommended buying shares of Rosetta Stone. 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.