Earning surprises often give investors great returns over a short period of time. For example, when Wolverine World Wide (WWW) reported its earnings in May and surprised the market, the stock went up almost 20% in a matter of days.
Of course, not all earnings surprises are created equal. Often it is important to pay close attention to the quality of the earnings that beat estimates. It is especially positive when a company beats on both revenue and earnings. If a positive guidance is issued at the conference, it is further good news and almost guarantees handsome returns on the earnings day for investors.
The following five companies will report their quarterly earnings tomorrow. Over the most recent quarter, they had earnings surprises up to 188%. Will the surprises keep coming? It would be certainly interesting to follow their activities tomorrow.
Helen of Troy Limited (HELE) is a housewares & accessories company. It has a market cap of $1.07 billion. It had an earnings surprise of 4.5% last quarter. Helen of Troy Limited, together with its subsidiaries, engages in the design, development, import, marketing, and distribution of brand-name consumer products primarily in the United States and Canada, as well as in Europe, Asia, and Latin America. It operates in three segments: Personal Care, Housewares, and Healthcare/Home Environment. Given that its price is only 6.57% lower than its 52-week high, the overall market sentiment appears positive. At a P/E ratio of 9.73, the stock appears fairly cheap in valuation. The sub-one PEG ratio suggests it's somewhat undervalued. Helen of Troy has an enterprise value / EBITDA ratio of 8.44. Its profit margin was 9.34% over the past year. The company had a net income of $110.37 million and EBITDA of $168.74 million on revenue of $1.18 billion. Both its revenue and earnings grew in double digits over the latest quarter, by 24.00% and 20.20%, respectively. Recently, the stock is not traded actively. This month, 1.06 million shares are being shorted. The short ratio of Helen of Troy Limited is 7.30, accounting for 3.60% of floating shares. With a big earnings surprise, a short squeeze is certainly possible.
SemiLEDs Corporation (LEDS) is a semiconductor-memory chips company. It has a market cap of $77.71 million. It had an earnings surprise of 12% last quarter. SemiLEDs Corporation engages in the development, manufacture, and sale of light emitting diode ("LED") chips and LED components. Its products are used primarily for general lighting applications, including street lights and commercial, industrial, and residential lighting, as well as in backlighting, medical, automotive, and ultra violet applications. Its price/book ratio is 0.55. The company is currently losing money operationally. Its business has to turnaround for the situation to become more positive. The company had a net income of $-33.59 million and EBITDA of $-20.55 million on revenue of $25.58 million. The company has $66.38 million cash on its balance sheet. Its debt burden is $7.60 million. So liquidity is not yet a problem. I'd avoid this company at this price level.
NewLead Holdings Ltd. (NEWL) is a shipping company. It has a market cap of $26.74 million. It had an earnings surprise of 33% last quarter. NewLead Holdings operates as an international shipping company that owns and operates product tankers and dry bulk carriers. It operates in two segments, Wet Operations and Dry Operations. NewLead Holdings Ltd. has an enterprise value / EBITDA ratio of 21.76. It is on the expensive side. One concern is the company isn't profitable at this point. The company had a net income of $-258.21 million and EBITDA of $24.51 million on revenue of $68.64 million. Thinning trading volume suggests that trading interest in the company is waning. There aren't enough positive factors to buy this company based on insider purchase alone.
VOXX International Corporation (VOXX) is an electronics wholesale company. It has a market cap of $225.14 million. It had an earnings surprise of 188% last quarter. VOXX International Corporation, through its subsidiaries, operates as a distributor in the accessory, mobile, and consumer electronics industries in the United States and internationally. At a P/E ratio of 8.75, the stock appears fairly cheap in valuation. This company's value seems reasonable with a sub-one PEG ratio, suggesting its growth is outpacing its valuation. Its price/book ratio is 0.52. Such a low price/book ratio often suggests the market is discounting the asset value of the company, making it potentially undervalued. VOXX International has an enterprise value / EBITDA ratio of 4.47, quite cheap. It has a profit margin of 3.63%. I believe VOXX International's operating margin of 6.65% is acceptable. The company had a net income of $25.65 million and EBITDA of $56.74 million on revenue of $707.06 million. Its revenue grew by 27.10%, and its net income declined by 37.60% during the most recent quarter. This month, 1.92 million shares are being shorted. The short ratio of VOXX International is 6.80, accounting for 11.60% of floating shares. This is an interesting company to track closely.
Wolverine World Wide Inc. is an apparel footwear & accessories company. It has a market cap of $1.87 billion. It had an earnings surprise of 16% last quarter. The company pays a dividend of 1.30%. Wolverine World Wide designs, manufactures, sources, markets, licenses, and distributes branded footwear, apparel, and accessories. Its P/E ratio of 16.02 is on the expensive side. Investors should use some caution because of this valuation. Wolverine World Wide has an enterprise value / EBITDA ratio of 10.56. Its profit margin was 8.47% over the past year. The company had a net income of $115.98 million and EBITDA of $173.59 million on revenue of $1.4 billion. Its revenue declined by 2.40%, and its net income declined by 13.10% during the most recent quarter. Recently, the stock is not traded actively. This month, 3.35 million shares are being shorted. The short ratio of Wolverine World Wide is 4.20, accounting for 7.10% of floating shares.