NEW YORK (TheStreet) -- TIBCO Software (TIBX) surged in after-hours trading on Wednesday after Praesidium Investment Management, which owns approximately 5.5 million TIBCO shares, sent a bullish letter to the company's board of directors.
Praesidium, which invests for the long-term on behalf of its clients and often suggests constructive ideas to management and boards of directors, said the following to TIBCO in the letter, according to TheFlyonTheWall:
"We believe that TIBCO has a unique collection of valuable assets and industry leading technology, with products in some of the fastest-growing areas of software, such as data discovery, analytics, and complex event processing. However, we also see a company that is currently falling far short of its significant potential, resulting in what we see as a material disconnect between the high strategic value of TIBCO's technology and the price of TIBCO's stock in the public market.
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"We believe there is a substantial opportunity to unlock value at TIBCO and we look forward to a constructive dialogue with the Board on ways to achieve this. The Board should trust that as fiduciaries of our clients' capital we will do what is necessary to ensure that shareholder value is maximized at TIBCO."
The stock was up 5.21% to $21.81 at 4:25 p.m.
TheStreet Ratings team rates TIBCO SOFTWARE INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate TIBCO SOFTWARE INC (TIBX) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, revenue growth and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, weak operating cash flow and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the Software industry average, but is less than that of the S&P 500. The net income increased by 27.8% when compared to the same quarter one year prior, rising from $9.51 million to $12.15 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 7.7%. Since the same quarter one year prior, revenues slightly increased by 6.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- TIBCO SOFTWARE INC has improved earnings per share by 16.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TIBCO SOFTWARE INC reported lower earnings of $0.51 versus $0.72 in the prior year. This year, the market expects an improvement in earnings ($0.98 versus $0.51).
- Net operating cash flow has decreased to $52.87 million or 16.37% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Software industry and the overall market, TIBCO SOFTWARE INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: TIBX Ratings Report
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.