BlueNile (NASDAQ: NILE), the online retailer of diamonds and diamond jewelry announced its Q3 2013 results on October 31 before market hours. The quarterly performance had more reasons to worry about and less of cheer for the investors.
The company reported a meaningful revenue growth of 10% on a Y/Y basis. The company saw a minor dip in its operating margins even though the Net Income margins increased by 1 percentage point. However the marginal increase in Net Income margin was due to an tax benefit which the company received during Q3 2013. The decrease in operating margins is one fact which will worry investors even though the earnings per share (EPS) on a GAAP basis saw a 64.3% increase. Another worrying factor is the 5% dip in adjusted EBITDA. We sum up the company's performance in the table below.
Actual performance v/s analyst estimates
According to Streetinsider.com, theQ3 2013 consensus analyst estimate for Blue Nile was revenue of $99.82 million and adjusted earnings of 16 cents per share. The company missed the analyst estimates on both the topline as well as the bottom line. The quarterly revenues growth was 1 percentage point lower than the estimates. The adjusted earnings reported by the company came in at 15 cents per share, one cent lower than analyst estimates.
The quarterly performance from Blue Nile was not among the best it investors would have hoped for. The positives for the quarter were topline growth of 10%, while the negatives were the fall in operating profit margin, fall in adjusted EBITDA and the revenue as well as earnings misses. Blue Nile stock closed the last regular trading session at a price of $41.07, a daily gain of 1.16%. We believe that the stock, currently trading at a price-to-earnings (P/E) multiple of close to 48, is a risky bet as the company isn't reporting any super-normal growth or huge margin expansions in profit margins to support the high valuation multiple it currently enjoys. Add to that the many negatives from the quarterly performance and the risk of the stock as an investment assumes gigantic proportions.
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