The 10-second takeaway
For the quarter ended March 31 (Q1), Digital Generation beat slightly on revenues and beat expectations on earnings per share.
Compared to the prior-year quarter, revenue expanded significantly and GAAP earnings per share shrank significantly.
Margins contracted across the board.
Digital Generation logged revenue of $92.8 million. The eight analysts polled by S&P Capital IQ predicted sales of $91.1 million on the same basis. GAAP reported sales were 46% higher than the prior-year quarter's $63.5 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 $0.31. The seven earnings estimates compiled by S&P Capital IQ predicted $0.28 per share. GAAP EPS of $0.04 for Q1 were 91% lower than the prior-year quarter's $0.44 per share. (The prior-year quarter included -$0.01 per share in earnings from discontinued operations.)
Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.
For the quarter, gross margin was 65.0%, 110 basis points worse than the prior-year quarter. Operating margin was 12.8%, 2,090 basis points worse than the prior-year quarter. Net margin was 1.1%, 1,890 basis points worse than the prior-year quarter.
Next quarter's average estimate for revenue is $104 million. On the bottom line, the average EPS estimate is $0.42.
Next year's average estimate for revenue is $418.4 million. The average EPS estimate is $1.75.
The stock has a four-star rating (out of five) at Motley Fool CAPS, with 246 members rating the stock outperform and 10 members rating it underperform. Among 50 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 49 give Digital Generation a green thumbs-up, and one 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 $17.57.
Over the decades, small-cap stocks like Digital Generation 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 Digital Generation 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. 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.