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Bull of the Day: eGain Corporation (EGAN)

Ryan McQueeney
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Throughout the technology sector’s dominant streak as the leader of this market’s incredible bull run, it has been familiar behemoths like Nvidia (NVDA), Facebook (FB), and Netflix (NFLX) leading the way. These stocks might still have some life in them, but as of late, we have finally started to see money flow into small caps—suggesting that a whole new batch of tech stocks could be at play.

One small tech firm we have our eyes on right now is eGain Corporation (EGAN), a provider of customer engagement cloud solutions. The firm offers B2C companies a simple and affordable suite of products which deliver multichannel customer service through a single interaction and knowledge management platform.

Not only is eGain a small cap tech stock, but it is also focused on one of the hottest growth markets in the sector: cloud computing. This clearly checks multiple boxes for investors right now, and the stock has skyrocketed more than 650% over the past year. But eGain is still sporting a Zacks Rank #1 (Strong Buy) and looks like it could move higher based on a number of favorable metrics.

Latest Outlook

Here’s a look at how EGAN has performed over the past year, overlaid with its forward-looking earnings consensus projections for fiscal 2018 and 2019:


This chart helps illustrate both the extent to which EGAN has climbed, and why it has soared so much. As we can see, the stock has been consistently moving higher over the past year, and that is because its earnings outlook has also been improving.

Looking even closer, we can see that, just two months ago, eGain was projected to see a loss of 10 cents per share. Now, the firm is expected to see adjusted profits of 6 cents per share for the fiscal year ending in June. Meanwhile, the Zacks Consensus Estimate for earnings in eGain’s upcoming fiscal year has moved from -$0.07 to $0.13 per share in that same time.

This positive estimate revision activity is what has earned the stock its #1 (Strong Buy) designation. These recent revisions imply that analysts are just now catching up to eGain’s earnings improvements, and that could mean the stock has room to run higher.

But as we can see, eGain has actually been steadily improving its earnings outlook at an impressive rate over the past three years:

eGain was deep in the red not too long ago, and now the company has put together a string of profitable quarters based on adjusted earnings. This is helping the company sure up its financial position, which is illustrated by its similarly-improving cash flow trends:

eGain’s recent surge has left its valuation quite stretched, and it is understandable that some investors might be turned off by a stock trading at about 210x forward earnings. But the firm is projected to see EPS growth of 127% this year and 117% next year, and stretched valuations are what we expect from high-flying stocks notching triple-digit earnings growth in consecutive fiscal periods.

Bottom Line

eGain is a little-known firm which came out of nowhere to become one of our top-performing growth stocks over the past year. There are multiple indications that this growth is just getting started for the company, and combined with the fact that small cap tech stocks have garnered plenty of interest lately, this makes it seem like EGAN is poised to keep breaking higher.

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