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TIBCO Software Inc. (TIBX) reports preliminary financial results for the quarter ended 2012-05-31.

TIBCO Software Inc. recently reported its preliminary financial results based on which we provide a unique peer-based analysis of the company. Our analysis is based on the company's performance over the last twelve months (unless stated otherwise).

TIBCO Software Inc.'s analysis versus peers uses the following peer-set: SAP AG ADS (SAP), Hewlett-Packard Co. (HPQ), CA Inc. (CA), Red Hat Inc. (RHT), MicroStrategy Inc. (MSTR), Progress Software Corp.(PRGS) and Pegasystems Inc. (PEGA). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.

Quarterly (USD million) 2012-05-31 2012-02-29 2011-11-30 2011-08-31 2011-05-31
Revenues 247.4 225.7 289.5 229.0 216.4
Revenue Growth % 9.6 (22.0) 26.4 5.8 16.8
Net Income 26.5 20.6 51.9 23.5 21.0
Net Income Growth % 28.3 (60.2) 120.5 11.8 31.9
Net Margin % 10.7 9.1 17.9 10.3 9.7
ROE % (Annualized) 13.1 9.8 24.9 11.3 9.9
ROA % (Annualized) 6.7 6.1 16.1 7.5 6.8

Valuation Drivers

TIBCO Software Inc.'s current Price/Book of 6.3 is about median in its peer group. We classify TIBCO Software Inc. as Harvesting because of the market's low expectations of growth (PE of 42.1 compared to peer median of 52.9) despite its relatively high returns (ROE of 15.1% compared to the peer median ROE of 11.9%).

The company attempts to achieve high profit margins (currently 12.4% vs. peer median of 8.7%) through differentiated products. It currently operates with peer median asset turns of 0.6x. TIBCO Software Inc.'s net margin is its highest relative to the last five years and compares to a low of 8.1% in 2008.

Economic Moat

Changes in the company's revenues are in-line with its peers (annual revenue changed by 22.0%) but its earnings performance has been better -- its annual earnings changed by 43.9% compared to the peer median of 28.8%, implying that it has better cost control relative to its peers. TIBCO Software Inc. currently converts every 1% of change in revenue into 2.0% of change in annual reported earnings.

TIBCO Software Inc.'s current return on assets is better than its peer median (8.0% vs. peer median 5.8%). However, its return on assets over the past five years has only been around the peer median (6.0% vs. peer median 6.1%). This performance suggests that the company may recently have found some new operational advantages to exploit relative to peers.

The company's gross margin of 75.7% is around peer median suggesting that TIBCO Software Inc.'s operations do not benefit from any differentiating pricing advantage. However, TIBCO Software Inc.'s pre-tax margin is more than the peer median (16.4% compared to 12.2%) suggesting relatively tight control on operating costs.

Growth & Investment Strategy

While TIBCO Software Inc.'s revenues growth has been above the peer median (12.6% vs. 9.0% respectively for the past three years), the stock's PE ratio of 42.1 is less than the peer median. This implies that the company's earnings are peaking and the market expects a decline in its growth expectations.

TIBCO Software Inc.'s annualized rate of change in capital of 5.2% over the past three years is less than its peer median of 6.9%. This investment has generated a peer median return on capital of 9.9% averaged over the same three years. The median return on capital investment on a relatively lower investment suggests that the company is under investing.

Earnings Quality

TIBCO Software Inc. has reported relatively strong net income margin for the last twelve months (12.4% vs. peer median of 8.7%). This strong margin performance was accompanied by a level of accruals that was around peer median (12.0% vs. peer median of 11.9%) suggesting that the reported net income is supported by a reasonable level of accruals.

TIBCO Software Inc.'s accruals over the last twelve months are positive suggesting a buildup of reserves. However, this level of accruals is also around the peer median and suggests the company is recording a proper level of reserves compared to its peers.

Trend Charts

Company Profile

TIBCO Software, Inc. provides middleware and infrastructure software. It provides consulting, educational, support, customer care, training and maintenance services. The company provides services to the energy, finance, healthcare, government, manufacturing, retail, telecommunications, transportation and logistics industries. TIBCO provides companies the two-second advantage, the ability to capture the right information, at the right time, and act on it preemptively for a competitive advantage. The company divides its products into three groups: service-oriented architecture, business optimization and business process management. It has operations in the United States, Europe, Middle East and Asia. The company was founded by Vivek Y. Ranadivé in 1997 and is headquartered in Palo Alto, CA.

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Source: Earnings Analysis For TIBCO Software Inc.