Digital publishing platform Zedge, Inc. (ZDGE) has been riding the tech wave. The stock has gained 1261.5% over the past nine months, and 121.5% over the past month. Its free comprehensive content services have gained it popularity in the global markets.
ZDGE’s revenues have increased at a CAGR of 2.8% over the past three years. Its total assets and tangible book value have increased at CAGRs of 1.5% and 2.9% respectively, over the same period. In its fiscal first quarter ended December 31, 2020, ZDGE’s revenues increased 85% year-over-year to $3.80 million. Its net income has risen significantly from a negative year-ago value to $1 million. Its EPS rose 200% to $0.08, beating the consensus estimates by 900%, and its cash flow from operations has increased 322.4% from the prior-year quarter to $1.50 million.
Analysts expect ZDGE’s EPS to rise 360% in the current year, and 115.4% in fiscal 2022. A consensus revenue estimate indicates a 35.5% rise in 2021 and a 29.5% rise next year.
Here’s what I think could shape the performance of ZDGE in the near term:
Extensive Market Reach and Profitability
ZDGE was one of the most preferred destinations for phone personalization in 2020. The company had 141 million unique users last year, with downloads crossing exceeding two billion. Its annual subscriptions increased 158% in 2020.
ZDGE’s trailing 12-month gross profit margin of 89.54% is 83% higher than the industry average 48.93%. Its trailing 12-month net income margin of 11.49% is 288.6% higher than the industry average 2.96%, while its leveraged free cash flow margin of 17.21% is 61.7% higher than the industry average 10.65%.
However, the company’s return on equity, return on assets, and return on total capital of 16.01%, 9.56% and 10.41% compare favorably with respective industry averages.
Favorable POWR Ratings
ZDGE has an overall rating of B, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
Our proprietary rating system evaluates each stock on a total eight different categories. ZDGE has an A grade for Quality, which is justified given the stock’s surging profitability. It has a B grade for Growth, Sentiment and Momentum. The stock hit its all-time high of $14.80 yesterday.
There are 14 other stocks in the Technology – Services with an overall rating of B. You can see them here.
ZDGE has emerged as the preferred destination for phone personalization worldwide . As the world’s dependence on technology around remote working is rising each day, consumers are constantly upgrading their devices to gain access to new advances, thereby generating significant demand for customization platforms. This trend should keep ZDGE’s momentum alive in the near term.
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ZDGE shares were trading at $13.04 per share on Thursday afternoon, down $0.03 (-0.23%). Year-to-date, ZDGE has gained 115.89%, versus a 4.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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