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Is the Time Ripe to Build Positions in DST Systems (DST)?
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Are you looking for a hot stock that has high chances of outperforming in 2017? DST Systems Inc. should then find a place in your portfolio.
Shares of the company have been escalating since it reported impressive fourth-quarter 2016 results. The indicators of a stock’s bullish run include a rise in its share price and continued uptrend in estimates.
Notably, the stock price has outperformed the Zacks categorized Computer-Software industry on a year-to-date basis. While the industry gained only 11%, the stock returned 14.4%.
Estimate Revision
In the last 60 days, the Zacks Consensus Estimate for DST Systems’ current quarter and fiscal 2017 witnessed upward revisions. For the current quarter, the Zacks Consensus Estimate is pegged at $1.27 per share, up from earnings of $1.25 per share earlier. The Zacks Consensus Estimate for fiscal 2017 is pegged at $6.43 per share compared with $6.13 projected 60 days ago.
Driving Factors
DST Systems is one of the leading global providers of sophisticated information processing software and systems to the financial services industry, primarily mutual funds and investment managers.
The company reported splendid fourth-quarter results, wherein earnings and revenues both surpassed the Zacks Consensus Estimate. Moreover, both revenues and earnings grew year over year.
We feel DST Systems’ business volume and massive scale of operation in Financial Services will attract new customers. Moreover, we expect steady contributions from acquisitions to support revenue growth. Continued share buybacks and dividend payments are other encouraging factors.
In tune with its strategy, DST Systems repurchased approximately 3.6 million shares for $400 million in 2015, reflecting a healthy balance sheet and strong cash-generating abilities. During 2016, the company returned $300 million through share buybacks. Moreover, since the beginning of Jan 2017, the company has repurchased $47 million worth of its common stock, resulting in $103 million remaining under the existing $300 million share repurchase plan announced in Jun 2016. These investor-friendly initiatives not only boost earnings but also instill investors’ confidence and loyalty.
We believe that DST Systems has a strong business model. The company generates recurring revenues and a good percentage of its business comes from long-term contracts with its customers. The company has developed the fee structure on a per-account and per-transaction basis, which indicates the fixed and flexible portion of revenues with respect to each client. Financial services companies that use DST Systems’ software to service multiple such clients generate incremental revenues with each additional client and/or transaction.
The model ensures a minimum revenue level even when there are limited transactions. However, in the current environment, when market conditions are improving, it will generate additional revenues due to a higher number of transactions.
Considering these positives, we believe that DST Systems is one such technology stock that deserves a place in investors’ portfolio.
DST Systems also delivered positive earnings surprises in all the last four quarters with an average beat of 9.3%.
Moreover, from a valuation perspective, the stock looks attractive as it currently trades significantly lower than the industry average based on a forward earnings estimate. This signifies huge upward potential. DST Systems currently trades at a forward P/E of 19.06x compared with the industry group average of 68.20x.
Hence, there is still a lot of momentum left in this Zacks Rank #1 (Strong Buy) stock, which is evident from its long-term earnings growth rate of 10%.
The stock is in the spotlight with striking performances on the back of solid earnings results and robust growth projections. Keeping this in mind, we perceive that investing in this stock will yield strong returns in the short term.
Fortinet, Western Digital and Micron have a long-tern expected earnings growth rate of 20.6%, 10% and 15.5%, respectively.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>
Unique Zacks Analysis of Your Chosen Ticker
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Is the Time Ripe to Build Positions in DST Systems (DST)?
Are you looking for a hot stock that has high chances of outperforming in 2017? DST Systems Inc. should then find a place in your portfolio.
Shares of the company have been escalating since it reported impressive fourth-quarter 2016 results. The indicators of a stock’s bullish run include a rise in its share price and continued uptrend in estimates.
Notably, the stock price has outperformed the Zacks categorized Computer-Software industry on a year-to-date basis. While the industry gained only 11%, the stock returned 14.4%.
Estimate Revision
In the last 60 days, the Zacks Consensus Estimate for DST Systems’ current quarter and fiscal 2017 witnessed upward revisions. For the current quarter, the Zacks Consensus Estimate is pegged at $1.27 per share, up from earnings of $1.25 per share earlier. The Zacks Consensus Estimate for fiscal 2017 is pegged at $6.43 per share compared with $6.13 projected 60 days ago.
Driving Factors
DST Systems is one of the leading global providers of sophisticated information processing software and systems to the financial services industry, primarily mutual funds and investment managers.
The company reported splendid fourth-quarter results, wherein earnings and revenues both surpassed the Zacks Consensus Estimate. Moreover, both revenues and earnings grew year over year.
We feel DST Systems’ business volume and massive scale of operation in Financial Services will attract new customers. Moreover, we expect steady contributions from acquisitions to support revenue growth. Continued share buybacks and dividend payments are other encouraging factors.
In tune with its strategy, DST Systems repurchased approximately 3.6 million shares for $400 million in 2015, reflecting a healthy balance sheet and strong cash-generating abilities. During 2016, the company returned $300 million through share buybacks. Moreover, since the beginning of Jan 2017, the company has repurchased $47 million worth of its common stock, resulting in $103 million remaining under the existing $300 million share repurchase plan announced in Jun 2016. These investor-friendly initiatives not only boost earnings but also instill investors’ confidence and loyalty.
We believe that DST Systems has a strong business model. The company generates recurring revenues and a good percentage of its business comes from long-term contracts with its customers. The company has developed the fee structure on a per-account and per-transaction basis, which indicates the fixed and flexible portion of revenues with respect to each client. Financial services companies that use DST Systems’ software to service multiple such clients generate incremental revenues with each additional client and/or transaction.
The model ensures a minimum revenue level even when there are limited transactions. However, in the current environment, when market conditions are improving, it will generate additional revenues due to a higher number of transactions.
Considering these positives, we believe that DST Systems is one such technology stock that deserves a place in investors’ portfolio.
DST Systems also delivered positive earnings surprises in all the last four quarters with an average beat of 9.3%.
Moreover, from a valuation perspective, the stock looks attractive as it currently trades significantly lower than the industry average based on a forward earnings estimate. This signifies huge upward potential. DST Systems currently trades at a forward P/E of 19.06x compared with the industry group average of 68.20x.
Hence, there is still a lot of momentum left in this Zacks Rank #1 (Strong Buy) stock, which is evident from its long-term earnings growth rate of 10%.
The stock is in the spotlight with striking performances on the back of solid earnings results and robust growth projections. Keeping this in mind, we perceive that investing in this stock will yield strong returns in the short term.
Other Stocks to Consider
Other stocks worth considering in the broader technology sector are Fortinet, Inc. (FTNT - Free Report) , Micron Technology, Inc. (MU - Free Report) and Applied Materials, Inc. (AMAT - Free Report) , all carrying a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here
Fortinet, Western Digital and Micron have a long-tern expected earnings growth rate of 20.6%, 10% and 15.5%, respectively.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>