DigitalGlobe Inc. (DGI), a renowned provider of space imagery and geospatial content, reported solid first quarter 2012 results on May 1. Over the past four quarters, this Zacks #1 Rank (Strong Buy) delivered an average earnings surprise of 170.8%. The Zacks Consensus Estimates for 2012 and 2013 indicate strong growth in both years.
Fabulous First Quarter
DigitalGlobe reported first quarter earnings per share (EPS) of 8 cents, beating the Zacks Consensus Estimate by a whopping 700.0% and significantly bettering last year's loss per share of 3 cents.
Revenues grew 12.4% year over year to $87.0 million, driven by strong growth in the Telecommunications services business. Revenue strength was boosted by higher sales of defense and intelligence products. Backlog increased 34.0% year over year to $337.7 million.
During the quarter, DigitalGlobe also received notification from the National Geospatial-Intelligence Agency (:NGA) regarding full funding for the Enhanced View Service Level Agreement (SLA). The company will receive $250.0 million under the contract by the end of this year.
Upbeat Fiscal Guidance
Based on a solid backlog and contract wins, DigitalGlobe raised its fiscal 2012 revenue growth expectations to 14.0% from 10.0% previously. The company also expects to generate an EBIDTA margin of 46.0%, up from the previously guided 43.0%.
Estimates Going Up
Over the last 90 days, the Zacks Consensus Estimates for 2012 and 2013 advanced by 11 cents and 12 cents, respectively, to 61 cents and $1.03. The estimate for fiscal 2012 represents a significant jump from a net loss in fiscal 2011, while the estimate for fiscal 2013 represents year-over-year growth of 68.9%.
Valuation Looks Reasonable
Considering the company's growth prospects, its valuation looks reasonable on a P/E basis. DigitalGlobe is currently trading at a P/E of 78.2X, up 574.1% from the peer group average of 11.6X. Besides P/E, the stock is also trading at a forward P/B of 1.36 and a P/S of 1.94, compared with the peer group's P/B of 0.95 and P/S of 1.04.
The estimated average earnings growth for five years is 16.6%, which is 20.3% above the peer group average of 13.8%.
Chart Shows Growth Potential
The chart clearly shows that share prices and EPS have remained volatile over the past few years. Prices fell proportionately with the drop in EPS. Hence, the directly proportional relationship indicates that the price will go up in the coming quarters given DigitalGlobe's earnings potential.
Currently, the price is in the range of $14.00-$15.00. The consensus estimates for 2012 and 2013 show upward trends, as seen from the chart below. Moreover, consensus estimates reflect a steep upward movement through fiscal 2015. Hence, we expect the stock price to also increase in keeping with the trend seen so far.
Longmont, Colorado-based DigitalGlobe Inc. specializes in providing satellite imagery products and geospatial information, leveraging a host of satellites. The products and services provide support to defense, intelligence and homeland security, mapping and analysis, environmental monitoring, oil and gas exploration, and infrastructure management verticals. DigitalGlobe operates under two segments, namely Defense & Intelligence and the Commercial segment. The company's customers include urban planners and U.S. federal agencies such as NASA and the United States Department of Defense's NGA. It competes with GeoEye Inc. (GEOY) in the satellite and aerial imagery and related products and services market.
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