RightNow Technologies, Inc. (RNOW) recently hit a new 52-week high as the company’s business continues to rebound on better corporate IT spending and capturing market share from its competitors. RightNow’s Q1 results from early February came in well ahead of expectations.
Company Description
RightNow Technologies, Inc. provides customer relationship management software and services in the United States and internationally. The company was founded in 1995 and has a market cap of $1.8 billion.
RightNow Technologies returned to profitability in 2009 after fighting through a couple tough years in 2008 and 2007 where corporate IT spending fell off a cliff due to the financial collapse and economic uncertainty. The strong momentum showed up in the company’s record Q4 results from February 8 that included impressive sales growth and a 400% earnings surprise.
Fourth-Quarter Results
Revenue for the period was up 15% from last year to $41.6 million. Earnings also came in strong at 5 cents per share, well ahead of the Zacks Consensus Estimate of 1 cent. The company now boasts an average earnings surprise of 375% over the last four quarters. Revenue for the year was up 9% to $152 million.
RightNow noted that its results were driven by companies replacing in-house, legacy CRM systems with solutions that provide increased functionality and flexibility. The company also noted that its strong presence and relationships with government entities bodes well for future business on the back of President Obama’s desire to modernize information systems, create transparency and drive collaboration.
Wide Margins and a Strong Balance Sheet
Gross margin held mostly steady during the quarter, down 100 basis points from Q3 to 70%. Operating expenses were well managed, up a reasonable 8% on the 15% sales growth. RightNow also worked strengthened its balance sheet, ending the year with $97 million in cash and equivalents and no debt.
Estimates and Valuation
The analysts are optimistic on the company’s ability to grow its earnings, with the next-year estimate projecting 132% earnings growth. With the current-year estimate pegged at 18 cents, this stock does look a bit pricey, trading with a forward P/E multiple of 105X, a very steep premium to the overall market.
The Chart
Shares of RNOW have been trending higher for most of the last year, recently hitting a new 52-week high at $19.99 before pulling back a bit. Look for support at the trend line on any more weakness. The stochastic below the chart is signaling that shares are approaching over-sold territory, take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Surprise Trader Service. Zacks Investment Research
