Model N Touches 52-Week High On Encouraging Q2 Results

Shares of Model N, Inc. (NYSE:MODN) hit a new 52-week high of $13.17 on Jun 3, eventually closing at $13.05. The stock has delivered a strong one-year return of 15.6% and a year-to-date return of 16.9%.

Model N delivered positive earnings surprises in each of the last four quarters with an average beat of 7.8%. This Zacks Rank #3 (Hold) company has a market cap of $359.1 million and a long-term expected earnings growth rate of 10%.

What is Driving the Stock Upward?

Model N’s shares have been on the rise ever since the company declared encouraging second-quarter fiscal 2016 results on May 9, 2016. Moreover, the company’s strategic acquisitions, product launches and deal wins drove the share price higher.

The company reported strong year-over-year growth in revenues (up 14.9%) in the second quarter of fiscal 2016. Reported revenues matched the Zacks Consensus Estimate. Coming to the bottom line, although the company posted a loss of 31 cents for the quarter, it compared favourably with the Zacks Consensus Estimate of a loss of 36 cents.

For the third quarter of fiscal 2016, Model N expects revenues in the range of $27.2 million to $27.5 million. The Zacks Consensus Estimate is pegged at $27 million. Non-GAAP loss per share is expected to range between 20 cents to 21 cents. The Zacks Consensus Estimate is pegged at a loss of 31 cents

For fiscal 2016, Model N expects revenues in the range of $106.5 million to $107.5 million. The Zacks Consensus Estimate is pegged at $107 million. Non-GAAP loss per share is expected to range between 65 cents to 63 cents per share. The Zacks Consensus Estimate is pegged at a loss of $1.05 per share.

An encouraging third-quarter and fiscal 2016 outlook and a bright overall trend resulted in upward estimate revisions for Model N. Over the last 60 days, two out of three estimates for Model N were revised upward for fiscal 2016. The Zacks Consensus Estimate for fiscal 2016 narrowed to a loss $1.05 per share from a loss of $1.06 per share over the same time frame.

Model N provides revenue management solutions for the life science and technology industries. It develops applications such as managed care and government pricing for life science companies and channel incentives based on design wins for technology companies.

However, pricing pressure caused by stiff competition from SAP SE (TO:SAP) , I-Many Inc. and Symphony Teleca Corp. may impact profitability in the to-be-reported quarter.

Stocks to Consider

Better-ranked stocks worth considering in the broader technology sector are DST Systems Inc. (NYSE:DST) and Synopsys Inc. (NASDAQ:SNPS) , both of which sport a Zacks Rank #1 (Strong Buy).