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Momentum

Solera Holdings Inc. reached its 52-week high on December 7 and has gained more than 25% over the past 6 months. This Zacks #1 Rank (Strong Buy) provider of information technology software and services raised its fiscal 2013 guidance last month, which has sparked earnings estimates.

Solera Tops in Q1 and Guides Higher

On November 5, Solera Holdings reported fiscal first quarter earnings per share (EPS) of 58 cents, inching past the Zacks Consensus Estimate of 57 cents.

Net sales decreased 1.5% from last year to $195.7 million, due mainly to lower claims volume in the European market. Adjusting for currency, revenue increased 5.8%. The Zacks Consensus Estimate was calling for only $193.0 million.

For fiscal 2013, management is targeting revenues between $810.0 million and $818.0 million, up from the previously expected range of $780.0 million to $788.0 million. Adjusted EPS is now expected between $2.52 and $2.60, up from the earlier range of $2.45 to $2.55.

Earnings Estimate Revisions

In the last 60 days, the Zacks Consensus Estimate for fiscal 2013 increased 3.5% to $2.38 per share, while the Zacks Consensus Estimate for fiscal 2014 advanced 4.7% to $2.69. For each period, all 4 earnings estimates were revised higher.

Premium Valuation is Justified

Currently, Solera Holdings is trading at a P/E of 22.35, P/S of 4.64, and P/B of 5.11, which are premiums to the peer group averages. Considering the growth potential and synergies from recent acquisitions, the premium valuation seems justified.

Shares of Solera Holdings have appreciated 25.72% in the past 6 months compared to a mere 8.4% increase for the S&P 500.

The increase in stock price is on account of its strong growth potential. The stock is currently trading above its 50 day and 200 day moving averages of $49.05 and $43.95, respectively.

Founded in 2005, Texas-based Solera Holdings provides software and services targeting the automobile insurance industry. The company took up the Claims Services Group of Automatic Data Processing Inc. (ADP) in 2006. Its solutions help in accelerating automobile insurance claims processing. The company serves 75,000 customers across 60 countries. Its customers include automobile insurance companies, collision repair facilities, independent assessors and automotive recyclers. The company currently has 2,500 employees and a market capitalization of $3.65 billion.


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