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What: Shares of Fleetmatics (NYSE:FLTX), a provider of fleet management software-as-a-service, jumped as much as 10% on Wednesday after the company reported higher-than-expected revenue and earnings for its fourth quarter. By 1:30 p.m., shares were up about 9.9% from the previous close.
So what: Revenue grew 28% year-over-year to $64 million in the fourth quarter, slightly higher than what analysts were expecting. While GAAP EPS declined to $0.32, down from $0.42 for the fourth quarter of 2013, non-GAAP EPS nearly doubled year-over-year to $0.44. Analysts were expecting just $0.29 per share in non-GAAP earnings.
On a GAAP basis, operating income actually grew significantly year-over-year, but a tax benefit during the fourth quarter of 2013 inflated the net income during that quarter. Operating expenses only grew by 14.6% year-over-year, far slower than revenue, somewhat of a rarity among fast-growing SaaS companies.
The company's free cash flow more than doubled year-over-year in the fourth quarter, and it increased by more than a factor of five for the full year. In 2014, Fleetmatics managed an operating margin of 15.3% and a free cash flow margin of 13.3%.
Now what: Fleetmatics expects to grow revenue by 25% in 2015, factoring in the negative effects of foreign currency exchange issues. Non-GAAP EPS for the full year is expected to be between $1.26 and $1.30, compared to $1.09 in 2014.
While Fleetmatics is growing fast and posting exceptional margins, unlike many SaaS firms, the stock is still expensive, trading at around 37 times 2014 non-GAAP earnings. Investors considering buying shares of the company need to decide whether this growth warrants such a high price.
Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.