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Market Caps Not Necessarily Reflecting Performance
Our April Newsletter is the first in our series of reflections by people who are using our On-Demand Dashboards. We have found that CFOs and Operating Executives that are utilizing this tool can provide some interesting insights for their peers. This month, Christine J. Cox, principal of Interim CFO Services and a seasoned technology CFO with experience with both private and public companies, has noticed that in today’s volatile climate, change in market caps may be obscuring some healthy fundamentals.
While it is interesting and frequently helpful that a rising tide floats all boats, it is far more detrimental a fact that the converse is also true. Let’s take the painful case of our current business climate. Layoffs, business closings, and missed targets top the headlines on a regular basis, and have created turbulent and unpredictable seas for all vessels, large or small. This steady flow of negative press, along with the incumbent pressure on stock price, has all but obliterated the fact that some companies are faring quite well in these difficult times.
On-Demand Dashboards make it easy to look at market caps in relation to operating data..
ü On-Demand Dashboards allow us to quickly assemble a set of companies and scan results,
ü We can assemble as many as ten periods on a report, enabling us to look at five different companies’ financial results for FY 2008 and FY 2007 simultaneously.
ü On-Demand Dashboard are conveniently displayed in an Excel spreadsheet, allowing users to add their own company numbers and manipulate data to assist in our analysis.
The selected companies in this month’s report represent different tech markets and a broad array of company sizes, based on revenue and headcount. The companies in our first series demonstrated a decrease in market cap between FY 2007 and FY 2008 ranging from -16% to -69%. Yet revenue increased in each company over the same time period. In a few cases, EBITDA also increased. No companies reflected headcount reductions in 2008.
- ScanSource demonstrated a 9% increase in revenue in 2008 along with a 23% increase in EBITDA, while market cap declined 16%.
- PhaseForward announced 27% revenue growth year over year, with a strong 32% increase in EBITDA. Yet market cap declined 38%.
- Isilon grew revenue by 29% in 2008 and, although they posted negative earnings and EBITDA, both values improved since 2007. Market cap declined 32%.
For some companies, the news was all good, yet it would seem there was still downward pressure on stock price.
- Concur Technologies increased revenue 67% in the turbulent market of 2008, and bolstered EBITDA by a dramatic 87%. Market cap increased 43%.
- Macrovision Solutions announced a whopping 128% surge in revenue growth year over year, with an impressive 70% increase in EBITDA. It would appear that the market didn’t respond however, registering only a 10% increase in total market cap.
See the actual results in the Dashboards below.
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