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Why Agilysys, Inc. Shares Plunged

By Steve Symington – Jan 31, 2014 at 8:23PM

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Is Agilysys' drop meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Agilysys, Inc. (AGYS 0.40%) fell more than 10% during Friday's intraday trading, then recovered partially to close down around 5% after the hospitality industry software company released solid fiscal third-quarter 2014 results, but revised forward revenue guidance downward.

So what: Quarterly revenue fell 8% year over year to $26 million -- a result largely driven by decreased sales of lower margin remarketed products, but partially offset by 11% growth in recurring support revenue to $13 million. That translated to adjusted income of $0.01 per share, which was inline with analysts' expectations.

However, without providing specific numbers, management revised its outlook to say fiscal 2014 revenue will likely increase at a rate "slightly below the expected annual growth for the industry of 5% to 7%."

Now what: With this in mind, management explained the revision wasn't indicative of a broader problem in the business, but instead, the result of timing of revenue recognition for certain contracts. Going forward in fiscal 2015, management insisted sales should resume growing at a slightly better-than-average industry rate.

That's fair enough, but I'm still not particularly intrigued with Agiysys' prospects from a long-term investment standpoint. Until renewed growth and higher profitability resumes, I think investors have plenty of other great places to put their money to work.

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.

Stocks Mentioned

Agilysys Stock Quote
$67.22 (0.40%) $0.27

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