Blucora (BCOR) Tax season is over, but analysts are moving estimates lower for this company despite an outsized recent beat. It is a Zacks Rank #5 (Strong Sell). It is the Bear of the Day.
Tax Season is Over
A lot of people might focus on the TaxAct side of the business and after Q1 and Q2, the revenues from that unit will almost always drop precipitously. That is one reason analyst might have reined in estimates, but this unit is growing on a year over year basis.
I should disclose at this time that I am a TaxAct subscriber / user and I am very pleased with this service. I know that I originally was attracted by the low rate for the service, but I have been a customer now for the last three years. I expect to remain a customer over the next several years as well.
Blucora is engaged in providing internet-based solutions for consumers and business partners. It owns and operates two Internet businesses. Blucora's InfoSpace business provides online search and monetization solutions. The company's TaxACT business provides online tax preparation solutions to consumers and professional preparers. Blucora was formerly known as InfoSpace and is headquartered in Bellevue, Washington.
Good Earnings History
Looking to the earnings history, I see a company that has gotten it right over the last year or even more. They have posted six straight positive earnings surprises. So over the last year and a half, management has done its job of guiding Wall Street to have appropriate expectations.
Infospace vs TaxAct
The most recent earnings report showed that the company saw solid growth from each of its two main service areas. $100M in search revenue was a solid gain from $75M in the year ago period. Tax Preparation revenue of $64M was a huge increase form $40M in the year ago period.
Earnings Estimates Tick Lower
Of late, earnings estimates have declined. The Zacks Consensus Estimate for 2013 has slipped from $1.02 in March to $0.96 in April down to $0.76 in May. That sort of decline is something makes a lot of people take notice is and is the major reason this stock has its low Zack Rank.
The same could be said of the 2014 Zacks Consensus Estimate as it fell from $1.54 in March, to $1.34 in April down to $1.03 in May. Earnings estimate revisions are the largest component of the Zacks Rank that can influence a change in rank.
The valuation picture for BCOR is slightly mixed. The trailing PE of 11x shows the company trading at a discount to the industry average of 21x. The forward PE of 24x, however shows the company trading at a premium to the 19x industry average. The more conservative measure of price to book shows the company at 1.7x with the industry average of 4.5x.
The price and consensus chart shows a disturbing trend in earnings estimates. The stock has moved up through the changes in earnings estimates, and given that there was $0.40 beat in a recent quarter there could be a high degree of "noise" in the earnings. That noise may end up clouding the picture in what is otherwise a decent growth story.
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