Why Dealertrack Technologies (TRAK) Stock Is Down Today

Tickers in this article: TRAK

NEW YORK ( TheStreet) --  Dealertrack Technologies was falling -12.5% to $38.83 Tuesday after missing analysts' expectations for earnings in the first quarter.

For the first quarter Dealertrack reported earnings of 23 cents a share, missing the Capital IQ Consensus Estimate of 30 cents a share by 7 cents. Revenue grew 45.6% from the year-ago quarter to $158.8 million. Analysts expected revenue of $155.7 million for the quarter.

Looking forward to full-year 2014, Dealertrack expects revenue of $814 million to $826 million, up from its previous guidance of $800 million to $816 million.

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TheStreet Ratings team rates DEALERTRACK TECHNOLOGIES INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate DEALERTRACK TECHNOLOGIES INC (TRAK) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • TRAK's revenue growth has slightly outpaced the industry average of 21.3%. Since the same quarter one year prior, revenues rose by 23.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Although TRAK's debt-to-equity ratio of 0.28 is very low, it is currently higher than that of the industry average. To add to this, TRAK has a quick ratio of 1.83, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Compared to its closing price of one year ago, TRAK's share price has jumped by 47.33%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 842.7% when compared to the same quarter one year ago, falling from $0.50 million to -$3.71 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet Software & Services industry and the overall market, DEALERTRACK TECHNOLOGIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: TRAK Ratings Report

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