On Jun 12, 2013, Zacks Investment Research upgraded DTS Inc (DTSI - Snapshot Report) to a Zacks Rank #1 (Strong Buy). With a strong return of 28.5% over the past six months and a positive estimate revision trend, DTS is an attractive investment opportunity.
Why the Upgrade?
DTS continues to impress with its innovative product pipeline, increasing online availability, new customer wins and partnerships. DTS reported a better-than-expected first quarter of 2013, with non-GAAP earnings (including stock-based compensation) of 7 cents, much better than the Zacks Consensus Estimate of a loss of 7 cents per share.
Revenues for the quarter increased 21.7% on a year-over-year basis to $32.7 million. However, revenues were slightly below the Zacks Consensus Estimate of $33.0 million. The primary driving factor behind DTS’ strong performance has been strategic partnerships with the likes of Qualcomm, Samsung, Pantech, Yulong, Lenovo, Panasonic, Fujitsu, Haier, LG, Changhong, Hisense, TCL, Konka, Skyworth and Huawei.
The partnerships with these consumer electronics manufacturers have not only expanded DTS’s penetration in the Asian markets but also boosted revenue growth over the last few quarters. The recently signed partnership between DTS and automaker BYD will expand DTS’ reach in the Chinese automotive industry.
DTS believes that the primary growth driver for 2013 will be the network connected business (TV and mobile devices), which will offset sluggish growth from the Blu-Ray market. We believe that DTS will continue to gain from accelerated expansion of its technology into new markets, such as smartphones, portable devices, digital media players and network-connected TV space.
The Zacks Consensus Estimate for fiscal 2013 increased 6.2% (4 cents) to 69 cents per share as most of the estimates were revised higher over the last 60 days. Earnings estimate is much better than the year-ago loss of 38 cents per share. For fiscal 2014, the Zacks Consensus Estimate is pegged at 74 cents per share.
The long-term expected earnings growth rate for DTS is 15.2%.
Other Stocks to Consider
Investors can also consider other stocks that are doing well right now. These include Sonic Foundry , Akamai Technologies (AKAM - Analyst Report) and Advent Software (ADVS - Snapshot Report). Currently, all of them carry a Zacks Rank #1 (Strong Buy).