What could Ebix be worth?
In its latest quarter, Ebix reported revenue of $51.0 million, an increase of 7% year-over-year, but earnings per share declined over 25% to $0.35. Cash generated from operations fell to $10.6 million, down 50%, moderately affected by legal and extraordinary operational costs.
Using a cash earnings times a capitalization multiplier valuation and giving Ebix the benefit of the doubt accounting-wise, fair business value looks to around $15 a share at a conservative 14 times multiple. This calculation, with cash earnings around $40 million and a cash profit margin of 20% on sales of $200 million, looks reasonable based on peer comparisons even considering the lackluster quarter.
For its operations, Quality Systems, Inc. (NASDAQ:QSII) reported revenues of $109.5 million for the latest quarter, a 7% drop from last year. Net income came in at $12.9 million, a decrease of 16%. Though the company said it saw significant growth in its sales pipeline for the first time in several quarters and a meaningful reduction in operating expenses, thanks to a restructuring effort.
With estimated revenues of $500 million, cash earnings at $75 million, and a profit margin of 15%, Quality Systems, Inc. (NASDAQ:QSII) is currently priced around a 16 times multiple. Reasonably fair given the company’s optimistic outlook.
In its last quarter, Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) reported adjusted revenue of $347.1 million, down around 6% year-over-year. Adjusted operating income came in at $18.6 million, down over 60%. On the plus side, the company achieved its highest quarterly level of new bookings since the fourth quarter of 2011 and grew its contract revenue backlog 16% over the prior quarter.
Assuming sales around $1.47 billion, earnings of $128 million, and a profit margin at near 8.7%, Allscripts Healthcare Solutions Inc (NASDAQ:MDRX) shares trade at an aggressive 20 times multiple. This value may be overly enthusiastic even in light of the company’s pluses.
Conclusion
Ebix shares are certainly interesting. If most of the concerns about the company are valid, the shares could be vastly overpriced. But if the firm’s fundamentals prevail, the shares could be worth a lot more than currently quoted. Which is more likely? Frankly, I’m not sure. But either way, Ebix’s share price should be far different than it is today.
The article Is This Beleaguered Software Company Trading Too High or Too Low? originally appeared on Fool.com is written by Bob Chandler.
Bob Chandler has no position in any stocks mentioned. The Motley Fool recommends Quality Systems.
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