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Why Demandware (DWRE) Is Up Today

NEW YORK (TheStreet) -- Demandware (DWRE - Get Report) gained 10.4% to $70 after announcing quarterly results that beat analyst estimates for earnings and revenue. The company also announced that it is searching for a new CFO.

In its fourth-quarter earnings report Demandware posted earnings of 16 cents a share, beating the Capital IQ Consensus Estimate of 15 cents a share by 1 cent. The company saw revenue increase by 35% to $35.5 million in the quarter. Analysts estimated revenue of $33.2 million in the quarter.

The company said that contract backlog reached $348.6 million by Dec. 31, 2013, a 67% increase from the year-ago period.

In addition to the earnings report Demandware announced that CFO Scott Dussault will leave the company, and that it will launch a search for a new CFO. Dussault will serve as CFO until June 6, 2014, and will be able to serve as an advisor for the company until June 2015.

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TheStreet Ratings team rates DEMANDWARE INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate DEMANDWARE INC (DWRE) a SELL. This is driven by some concerns, 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 deteriorating net income, disappointing return on equity 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 Internet Software & Services industry. The net income has significantly decreased by 80.3% when compared to the same quarter one year ago, falling from -$3.47 million to -$6.26 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, DEMANDWARE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • DEMANDWARE INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from 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, DEMANDWARE INC swung to a loss, reporting -$0.29 versus $0.02 in the prior year. This year, the market expects an improvement in earnings (-$0.22 versus -$0.29).
  • The gross profit margin for DEMANDWARE INC is currently very high, coming in at 75.68%. 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 -25.56% is in-line with the industry average.
  • Net operating cash flow has significantly increased by 774.93% to $2.45 million when compared to the same quarter last year. In addition, DEMANDWARE INC has also vastly surpassed the industry average cash flow growth rate of 12.26%.
  • You can view the full analysis from the report here: DWRE Ratings Report

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