On May 14, 2013, Zacks Investment Research upgraded DTS Inc (DTSI) to a Zacks Rank #1 (Strong Buy). With a strong return of 30.5% over the past six months and a positive estimate revision trend, DTS is an attractive investment opportunity.
Why the Upgrade?
DTS reported a better-than-expected first quarter of 2013, with non-GAAP earnings (including stock-based compensation) of 7 cents, much better than the Zacks Consensus Estimate of a loss of 7 cents per share.
Revenues for the quarter increased 21.7% on a year-over-year basis to $32.7 million. However, revenues were slightly below the Zacks Consensus Estimate of $33.0 million.
Operating profit (excluding amortization & acquisition cost but including stock-based compensation) decreased to $3.9 million from $7.6 million in the previous-year quarter, primarily due to higher operating expenses.
The earnings beat helped DTS to reiterate its revenue guidance range of $140 million-$146 million for 2013. DTS continues to expect non-GAAP operating margin in the low to mid-20s and non-GAAP earnings in the range of $1.05 to $1.20 per share.
DTS expects revenues from the Blu-ray segment to be approximately 25% of total revenue due to the impact of the new game console cycle. However, DTS expects flat to marginal growth in standalone players and a decline in Blu-ray-enabled PCs.
Moreover, DTS hinted that the primary growth driver in 2013 will be the network connected business (TV and mobile devices).
The Zacks Consensus Estimate for fiscal 2013 increased 6.2% (4 cents) to 69 cents per share as most of the estimates were revised higher over the last 30 days. Earnings estimate is much better than the year-ago loss of 38 cents per share.
For fiscal 2014, the Zacks Consensus Estimate is pegged at 74 cents per share.
The long-term expected earnings growth rate for DTS is 15.2%.
Other Stocks to Consider:
Investors can also consider other stocks that are doing well right now. These include Sonic Foundry (SOFO), Akamai (AKAM) and Facebook (FB). While Sonic and Akamai carry a Zacks Rank #1 (Strong Buy), Facebook carries a Zacks Rank #2 (Buy).
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