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Dynatrace (DT) is a Zacks Rank #2 (Buy) and it is the Bull of the Day today. This is a stock that I added to the pay subscriber service call Home Run Investor offered on Zacks.com back on November 13 of 2019. This is the longest that I have held a stock in this service for some time and I believe there are more gains to be had. One of the reasons I remain long this name is that they consistently beat earnings estimate… and they did that again last week.
Dynatrace, Inc. provides a software intelligence platform for the enterprise cloud applications. It operates Dynatrace, a platform for running and optimizing multi-cloud environments. Its products include AppMon that works in various application environments, such as mobile apps, web apps, web browsers, web servers, Java, .NET, Node.js, PHP, databases, middleware, and mainframe; and Classic Real User Monitoring, which tracks user's experience from an edge devices comprising smart phones, tablets, PCs, or kiosk through cloud services, as well as customer's web tiers. The company also provides Synthetic Classic, which offers customer experience, as well as is used to monitor application and application program interface availability and performance; and Network Application Monitoring that provides enterprise applications, network services, user experience, and application delivery across wide-area networks. Its platform allows its customers to modernize and automate IT operations, develop and release software, and enhance user experiences. The company also offers implementation, consulting, and training services. Dynatrace, Inc. markets its products through a combination of direct sales team and a network of partners, including resellers, system integrators, and managed service providers. It serves customers in various industries comprising banking, insurance, retail, manufacturing, travel, and software. The company operates in North America, Europe, the Middle East, Africa, the Asia Pacific, and Latin America. Dynatrace, Inc. is headquartered in Waltham, Massachusetts.
Anytime I look at a company I look at the earnings history first. Does management have the capability of guiding Wall Street to a beatable level? The answer for DT is yes.
Over the last four quarters I see four beats… and they are not small beats, these are big beats.
The average positive earnings surprise over the last four quarters is 44%, and that is just great.
Earnings Estimate Revisions
The key to the Zacks Rank is move in earnings estimates. Positive estimate revisions send stocks to a higher Zacks Rank and vice versa. If you are a fundamental investor, you know that higher earnings will lead to higher stock prices.
The estimates for DT are headed higher.
The company just posted a solid beat and raised expectations as well. This quarter has seen a bump of penny higher, and that helped push the fiscal 2021 up to 58 cents from 56 cents.
The fiscal 2022 year saw an increase of 2 cents as it moved from 58 cents to 60 cents.
Those are not huge moves in estimates, but over time, you will see that DT consistently beats and also has a tendency to guide higher as well.
The valuation for DT is a little stiff, but you are paying a premium for a stock that is consistently beating the number and posting good growth. The forward PE of 89x is rich, but consider that you are also getting 27% topline growth on an annual basis for the most recent quarter. The forecast for next fiscal year is topline growth of 23%, but don’t be surprised if that number doesn’t increase soon.
I see a 13.7x price to book, but that is to be expected from an asset slim name like this. Price to sales at 22x is also somewhat high, but it tells you that Wall Street values each incremental sale the company makes.
Dynatrace, Inc. Price and Consensus
Dynatrace, Inc. price-consensus-chart | Dynatrace, Inc. Quote
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