LeapFrog Enterprises (LF) posted a big revenue number recently on its way to a seventh straight positive earnings surprise. This help to make the stock a Zacks #1 Rank (Strong Buy).
Company Description
LeapFrog Enterprises makes technology-based learning products and related proprietary content for children worldwide. The company offers multimedia learning platform products, including LeapPad, a kid-tough personalized learning tablet with a built-in camera and video recorder; and Leapster Explorer, a handheld multimedia learning platform. The company was founded in 1995 and is headquartered in Emeryville, California. LeapFrog Enterprises, Inc. is a subsidiary of Mollusk Holdings, LLC.
LeapFrog Enterprises Has Seven Straight Positive Surprises
LeapFrog Enterprises has topped the Zacks Consensus Estimate in seven straight quarters. The beats have been solid, with the company posting earnings that are $0.06 higher on average. That works out to an average of 22% positive surprises for LeapFrog. Following these seven positive earnings surprises, the stock has reacted positively. On average, the stock was higher by 6.5% in the session following the earnings report.
In the September 2011 quarter, the stock rose more than 20% following a 29% positive earnings surprise. The company reported earnings of $0.35, $0.08 more than the Zacks Consensus Estimate. Revenues of $151 million were approximately $10 more than the Zacks Consensus Estimate.
LeapFrog Enterprises Most Recent Reported Earnings
On May 3, 2012 LeapFrog Enterprises reported revenue of $72 million, roughly $21 million higher than the Zacks Consensus Estimate and up from $40 million reported in year ago quarter. In addition, earnings per share came in at a loss of $0.14, $0.12 higher than the Zacks Consensus Estimate of a loss of $0.26. The beat of 46% helped to lift the stock higher by about 10% in the session following the release.
LeapFrog Enterprises Sees Estimates Moving Higher
LeapFrog Enterprises has seen earnings estimates move higher following the recent positive earnings surprise. The Zacks Consensus Estimate for 2012 was $0.51 prior to the most recent earnings and has since moved to $0.61. That represents an increase of more than 19%.
Estimates for 2013 have also seen an increase following the most recent quarterly release. The Zacks Consensus Estimate for 2013 was $0.65 in April 2012. The current level is now $0.76, an increase of almost 17%. The implied earnings growth rate, from 2012 to 2013, now stands at 24.5% which is something aggressive growth investors love to see in their holdings.
The valuation for LeapFrog Enterprises is a little mixed, with the PE ratios coming in a little higher than the industry average. Price to book is roughly in line with the industry average and price is sales is well below the industry average. A forward PE multiple of 17x is still well below that of the expected earnings growth rate of 24.5% so there should be plenty of room for multiple expansion despite the 11x industry average.
The Chart
A quick look at the chart shows a stock that has been on a tear over the last six months. The last two positive earnings surprises were accompanied by stronger than expected revenues. Aggressive growth investors know that stronger sales can produce better earnings faster than weaker sales can and that is just what LeapFrog has done. The most recent quarter saw a huge increase in revenue from year ago levels and the Zacks Consensus Estimate and has been a large reason why the stock continues to push higher. LeapFrog Enterprises is a Zacks #1 Rank (Strong Buy).
Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service
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