Autobytel Has Upside Potential


Source: Finviz

Based on the stock price chart above, it is clear that Autobytel Inc. (NASDAQ:ABTL) shares are in a range-bound trend. Shareholders and potential investors in the company may be interested in knowing what the future holds for their investment and whether ABTL stock rates as a buy, hold or sell.


Given the stock’s recent performance, it seemed like a good time to take a closer look at the earnings expectations, peer analysis & valuation and fundamentals. That might help answer whether ABTL is a good buy or sell in 2017.

Earnings Analysis – Solid earnings surprise


Source: Reuters

ABTL reported better-than-expected earnings for the fourth consecutive quarter. The company posted its earnings for Q12017 on May 4th. It reported EPS of $0.26 for the quarter, topping Street estimates of $0.19 by $0.07. The company had revenue of $37.34 million for the quarter, compared to the Street estimate of $34.96 million. During the same quarter in the prior year, it posted EPS of $0.22. Currently, analysts expect ABTL to generate revenue of $35.42 million and EPS of $0.20 in Q22017. ABTL has a 12-month low of $10.72 and a 12-month high of $18.39 (CMP $13.02). The firm’s market cap is $144 million.


Consensus Estimates Analysis – Positive expectations

Source: Reuters

ABTL had revenue of $157 million for the FY2016 (up 18% YoY). Currently, analysts expect the company to generate revenue of $158 million (up 1% YoY) in fiscal 2017 and $166 million (up 5% YoY) in fiscal 2018.


“The momentum from our record 2016 has carried into the first quarter,” said Jeff Coats, president and CEO of Autobytel. “Our results were highlighted by another quarter of triple-digit growth in our clicks business, which is becoming a meaningful contributor to our overall financial performance. As expected, our lead revenues were down due to the effect of last year’s initiative to systematically reduce lower-quality leads supply.

They are expecting it to post EPS of $1.26 in 2017. This implies a 2017 forward P/E for shares at 10.3x. Analysts are currently expecting 2018 EPS of $1.39, which implies a 2018 forward P/E for shares at 9.3x. This is below the S&P 500 forward P/E of 19.7x. In other words, the stock is trading a t discount/undervalued compared to the S&P 500.


Income Statement Analysis

Source: Morningstar

Revenue in Q12017 increased by 8% to $37.3 million compared to Q12016. This was driven by the strong growth of advertising click revenues (up 152% to $6.5 million).


Over the past 5 quarters, operating income margin increased to 3.24% from negative 2.44% (568 bps improvement). This is primarily due to a decreasing trend in operating expenses (31% from 40%). ABTL expects “operating expenses as a percentage of revenues to continue in the low 30% range as it increases investments in technology, and sales and marketing resources in 2017.” Also, net income margin improved from negative 1.86% to 1.30% due to growth of advertising click revenues and reduced operating expenses.


Improving operational efficiency also contributed to free cash flow. TTM free cash flow was $19 million, increasing by $14 million compared to FY2012.

Current Valuation – Trading at a discount

Investors should look at valuation methodologies when deciding whether to enter or exit a stock. Valuation is driven by perceived growth, risks and investors’ willingness to pay. There are various methods available to assess the valuation of a stock.


Source: Morningstar

I have discussed that based on the forward P/E ratio, ABTL is trading at way below the S&P 500 forward P/E of 19x.

Current Price/Earnings ratio is 33.4x, which is below the industry average of 36.7x and ABTL’s 5-year 38.3x.

Price/Book ratio is 1.1x, which is way below the industry average of 5.2x and that of the S&P 500 of 3.0x.

Price/Sales ratio is 1.2x, which is way below the industry average of 6.3x and that of the S&P 500 of 2.1x.

Price/Cash Flow ratio is 9.1x, which is below the industry average of 11.4x and that of the S&P 500 of 13.3x.


Market View – Positive

Source: Nasdaq

As on May 19, 2017, ABTL stock increased by 2.7% over the last 12 months. Of the analysts covering company, 3 recommended it as a Strong Buy.


My Recommendation: Buy Rating

I will recommend a Buy rating for ABTL based on the following factors:

The company has a striking earnings surprise history over the trailing five quarters and positive consensus estimates. It is trading at discount compared to the industry and the S&P 500. Analysts are expecting the company to post EPS of $1.26 in 2017. This implies a 2017 forward P/E for shares at 10.3x. Analysts are currently expecting 2018 EPS of $1.39, which implies a 2018 forward P/E for shares at 9.3x. This is below the S&P 500 forward P/E of 19.7x. In other words, the stock is trading at a discount/is undervalued compared to the S&P 500. Current Price/Earnings ratio is 33.4x, which is below the industry average of 36.7x and ABTL’s 5-year 38.3x. Improving operational efficiency.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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