NEW YORK (TheStreet) -- Shares of Cornerstone OnDemand Inc. (CSOD) are down 17.65% to $26.97 after the company lowered its 2014 fourth quarter guidance to $72.8 million to $75.8 million, short of consensus estimates of $81.54 million, according to Reuters.
The software company, which specializes in cloud-based applications for talent management, said that delayed service revenue will negatively affect fourth quarter results.
CEO Adam Miller started the third quarter earnings conference call with "the bad news."
"The lackluster performance of our emerging business units this year, in particular the poor performance of our public sector business unit in the third quarter combined with the elongated implementation cycles of our largest clients, which result in delayed service revenue, and the recent significant foreign exchange fluctuations have affected us going into the fourth quarter of this year and will result in a revenue shortfall for the year relative to our initial guidance," Miller said.
Separatley, TheStreet Ratings team rates CORNERSTONE ONDEMAND INC as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate CORNERSTONE ONDEMAND INC (CSOD) a SELL. This is driven by several 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 deteriorating net income, disappointing return on equity, weak operating cash flow, generally high debt management risk and generally disappointing historical performance in the stock itself."
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 91.5% when compared to the same quarter one year ago, falling from -$8.68 million to -$16.63 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, CORNERSTONE ONDEMAND INC's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$8.16 million or 412.37% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The debt-to-equity ratio is very high at 5.05 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Regardless of the company's weak debt-to-equity ratio, CSOD has managed to keep a strong quick ratio of 1.79, which demonstrates the ability to cover short-term cash needs.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.73%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 82.35% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- You can view the full analysis from the report here: CSOD Ratings Report