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Why Proofpoint (PFPT) Is Up Today

Stocks in this article: PFPT

NEW YORK (TheStreet) -- Proofpoint  (PFPT) was soaring 13.74% to $41.55 on Friday morning after the e-mail security company reported fourth-quarter results.

The company reported a 43% year-over-year revenue increase to $40.8 million, while subscription revenue also increased 43% year-over-year to $39.3 million. Billings totaled $48.9 million, which marked a 33% year-over-year increase. Operating cash flow was $5.3 million, while free cash flow was $2.2 million.

"Our record revenue, billings and free cash flow during the fourth quarter resulted from strong execution, as well as the ongoing robust demand for our integrated, cloud-based platform," said CEO Gary Steele in the company's statement. "The investments in our sales and product development, along with the addition of key acquisitions, have resulted in increased global leadership as we continued to penetrate some of the largest enterprises in the world."

"Looking forward, we entered 2014 with strong momentum as we continue to see an increase in the number and types of security threats worldwide, including advanced persistent threats. We believe Proofpoint remains well positioned to grow market share driven by our commitment to innovation and expanding global reach as the competitive landscape continues to shift in our favor."

TheStreet Ratings team rates PROOFPOINT INC as a "sell" with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate PROOFPOINT INC (PFPT) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 56.5% when compared to the same quarter one year ago, falling from -$4.59 million to -$7.19 million.
  • PROOFPOINT INC's earnings per share declined by 42.9% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, PROOFPOINT INC reported poor results of -$0.66 versus -$0.22 in the prior year. This year, the market expects an improvement in earnings (-$0.37 versus -$0.66).
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Software industry and the overall market, PROOFPOINT INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • PFPT's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.96 is somewhat weak and could be cause for future problems.
  • The gross profit margin for PROOFPOINT INC is currently very high, coming in at 76.05%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -20.83% is in-line with the industry average.
  • You can view the full analysis from the report here: PFPT Ratings Report

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