Miami, FL – October 23, 2018 (EmergingGrowth.com NewsWire) — EmergingGrowth.com, a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies, reports onServicesource International Inc., (NASDAQ: SREV).
Even before the announcement of quarterly results, Servicesource International Inc., (NASDAQ: SREV) delivered the death blow on Friday when it not only offered tepid preliminary numbers but also slashed its full-year outlook. Predictably, investors started dumping the stock thus resulting in a loss of over 45 percent on Friday. Now the question in investors minds is whether or not this presented an opportunity to enter the stock or avoid it like the plague.
There are a few factors that are not consistent with the sector. For instance, profit earnings (PE) ratio for the trailing twelve month period was 21.24 percent versus the sector’s lower 12.98 percent average. Similarly, the last five year average of PE was 38.32 versus the sector’s 22.72 percent, and the price to book ratio in the most recent quarter (MRQ) was 2.39 percent versus the sector’s 2.07 percent. However, price to tangible book ratio in MRQ of 2.56 percent is modestly lower than the sector’s 2.78 percent.
On the other hand, price to cash flow in the TTM was 7.53 percent versus the sector’s 14.26 percent. Sales in MRQ versus the first quarter of previous year suggested growth of 4.89 percent versus the sector’s 0.89 percent however sales in the TTM fell 0.93 percent relative to the 16 percent increase from the year-ago TTM period. Similarly, the pre-tax margin, operating margin and net profit margin for the TTM and five-year average were lower than the sector. This shows depressing data forcing investors to keep away.
Aside from these key metrics, Servicesource International has slashed its quarterly revenue forecast to about $57 million from its earlier projection of $60 – $61 million. As a result, the company is compelled to reduce the full-year forecast to $238 – $240 million, which was lower than the analysts’ expectations of $248 million before the revision.
Servicesource International CEO, Christopher Carrington, commented that “We have signed 12 new logos year-to-date, client net promoter scores continue to improve, and we have a strong balance sheet and liquidity profile. We look forward to providing additional details on the actions we are taking, and the progress we are making on our earnings call in November.”
The immediate rivals to Servicesource International are Concentrix and Sellbytel. whose annual revenues are $2 billion, and $3 billion respectively. Zuora Inc (NYSE: ZUO), is also facing pressures on operating and net profit margins though its gross margin was higher than the sector for the TTM period.
The sector seems to be struggling. Therefore, Servicesource International will likely come under pressure. The upcoming conference call the first week in November should provide clarity on the volatility and how the management is going to handle it. The key statistics do not indicate any favorable picture though the sharp drop might entice some investors to take few risks.
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