Earnings Analysis For TIBCO Software Inc. (TIBX)

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Earnings Analysis For TIBCO Software Inc. (TIBX)

TIBCO Software Inc. (TIBX) reports preliminary financial results for the quarter ended 2012-05-31.

TIBCO Software Inc. recently reported its preliminary financial results based on which we provide a unique peer-based analysis of the company. Our analysis is based on the company’s performance over the last twelve months (unless stated otherwise). For a more detailed analysis of this company (and over 40,000 other global equities) please visit www.capitalcube.com.

TIBCO Software Inc.’s analysis versus peers uses the following peer-set: SAP AG ADS (SAP), Hewlett-Packard Co. (HPQ), CA Inc. (CA), Red Hat Inc. (RHT), MicroStrategy Inc. (MSTR), Progress Software Corp.(PRGS) and Pegasystems Inc. (PEGA). The table below shows the preliminary results along with the recent trend for revenues, net income and returns.

Quarterly (USD million) 2012-05-31 2012-02-29 2011-11-30 2011-08-31 2011-05-31
Revenues 247.4 225.7 289.5 229.0 216.4
Revenue Growth % 9.6 (22.0) 26.4 5.8 16.8
Net Income 26.5 20.6 51.9 23.5 21.0
Net Income Growth % 28.3 (60.2) 120.5 11.8 31.9
Net Margin % 10.7 9.1 17.9 10.3 9.7
ROE % (Annualized) 13.1 9.8 24.9 11.3 9.9
ROA % (Annualized) 6.7 6.1 16.1 7.5 6.8

Valuation Drivers

TIBCO Software Inc.’s current Price/Book of 6.3 is about median in its peer group. We classify TIBX-US as Harvesting because of the market’s low expectations of growth (PE of 42.1 compared to peer median of 52.9) despite its relatively high returns (ROE of 15.1% compared to the peer median ROE of 11.9%).

The company attempts to achieve high profit margins (currently 12.4% vs. peer median of 8.7%) through differentiated products. It currently operates with peer median asset turns of 0.6x. TIBX-US’s net margin is its highest relative to the last five years and compares to a low of 8.1% in 2008.

Economic Moat

Changes in the company’s revenues are in-line with its peers (annual revenue changed by 22.0%) but its earnings performance has been better — its annual earnings changed by 43.9% compared to the peer median of 28.8%, implying that it has better cost control relative to its peers. TIBX-US currently converts every 1% of change in revenue into 2.0% of change in annual reported earnings.

TIBX-US’s current return on assets is better than its peer median (8.0% vs. peer median 5.8%). However, its return on assets over the past five years has only been around the peer median (6.0% vs. peer median 6.1%). This performance suggests that the company may recently have found some new operational advantages to exploit relative to peers.

The company’s gross margin of 75.7% is around peer median suggesting that TIBX-US’s operations do not benefit from any differentiating pricing advantage. However, TIBX-US’s pre-tax margin is more than the peer median (16.4% compared to 12.2%) suggesting relatively tight control on operating costs.

Growth & Investment Strategy

While TIBX-US’s revenues growth has been above the peer median (12.6% vs. 9.0% respectively for the past three years), the stock’s PE ratio of 42.1 is less than the peer median. This implies that the company’s earnings are peaking and the market expects a decline in its growth expectations.

TIBX-US’s annualized rate of change in capital of 5.2% over the past three years is less than its peer median of 6.9%. This investment has generated a peer median return on capital of 9.9% averaged over the same three years. The median return on capital investment on a relatively lower investment suggests that the company is under investing.

Earnings Quality

TIBX-US has reported relatively strong net income margin for the last twelve months (12.4% vs. peer median of 8.7%). This strong margin performance was accompanied by a level of accruals that was around peer median (12.0% vs. peer median of 11.9%) suggesting that the reported net income is supported by a reasonable level of accruals.

TIBX-US’s accruals over the last twelve months are positive suggesting a buildup of reserves. However, this level of accruals is also around the peer median and suggests the company is recording a proper level of reserves compared to its peers.

Trend Charts

Graph of Revenues Trend for TIBCO Software Inc. (TIBX)
Graph of Revenues Trend for TIBCO Software Inc. (TIBX)
Graph of Net Margin Trend for TIBCO Software Inc. (TIBX)
Graph of Net Margin Trend for TIBCO Software Inc. (TIBX)
Graph of Accruals Trend (% revenues, Quarterly) for TIBCO Software Inc. (TIBX)
Graph of Accruals Trend (% revenues, Annual or TTM) for TIBCO Software Inc. (TIBX)

Company Profile

TIBCO Software, Inc. provides middleware and infrastructure software. It provides consulting, educational, support, customer care, training and maintenance services. The company provides services to the energy, finance, healthcare, government, manufacturing, retail, telecommunications, transportation and logistics industries. TIBCO provides companies the two-second advantage, the ability to capture the right information, at the right time, and act on it preemptively for a competitive advantage. The company divides its products into three groups: service-oriented architecture, business optimization and business process management. It has operations in the United States, Europe, Middle East and Asia. The company was founded by Vivek Y. Ranadivé in 1997 and is headquartered in Palo Alto, CA.


The information presented in this report has been obtained from sources deemed to be reliable, but AnalytixInsight does not make any representation about the accuracy, completeness, or timeliness of this information. This report was produced by AnalytixInsight for informational purposes only and nothing contained herein should be construed as an offer to buy or sell or as a solicitation of an offer to buy or sell any security or derivative instrument. This report is current only as of the date that it was published and the opinions, estimates, ratings and other information may change without notice or publication. Past performance is no guarantee of future results. Prior to making an investment or other financial decision, please consult with your financial, legal and tax advisors. AnalytixInsight shall not be liable for any party’s use of this report. AnalytixInsight is not a broker-dealer and does not buy, sell, maintain a position, or make a market in any security referred to herein. One of the principal tenets for us at AnalytixInsight is that the best person to handle your finances is you. By your use of our services or by reading any our reports, you’re agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that AnalytixInsight, its directors, its employees, and its agents will not be liable for any investment decision made or action taken by you and others based on news, information, opinion, or any other material generated by us and/or published through our services. For a complete copy of our disclaimer, please visit our website www.analytixinsight.com.

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