Globant Q3 Earnings: Is GLOB Expensive at 72.6x Price/EPS?

in EARNINGS/INVESTING IDEAS by

Globant S.A. (NYSE:GLOB) is an IT services firm, based in Argentina that focuses on IT consulting and outsourcing engagements. With blue-chip clients like Disney and Google and several established Latin American companies the company has carved out a niche as an elite player in Latin America.

Globant is scheduled to report Q3 earnings results on August 15, 2019 after close of trading. The company is expected to report earnings of $0.59/share on revenue of $171.1 million. The consensus earnings per share (EPS) of $0.59/share is based on a poll of 8 analysts and represents a growth of 28.3% over the same quarter last year when the company reported earnings of $0.46/share.

The revenue forecast of $171.1 million based on a poll of 7 analysts implies a year-over-year (YoY) growth of 27.1%. Last year the company reported $134.6 million in revenue for the quarter.

Expected to report EPS growth of $0.13/share for Q3, 2019
Metric Expected Prior Year YoY Change
Revenue $171.10 $134.57 27.1%
EPS $0.59 $0.46 28.3%

Earnings Call Trends

Management has been great at managing analyst expectations historically. The company has a perfect record over the last 8 tracked quarters of exceeding earnings guidance.

What are your expectations from Globant for this earnings this quarter? Let us know in the comments!

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2019 $0.53 $0.53 0.4% Beat
Q1, 2019 $0.47 $0.50 7.0% Beat
Q4, 2018 $0.47 $0.50 6.4% Beat
Q3, 2018 $0.44 $0.46 4.5% Beat
Q2, 2018 $0.39 $0.40 3.9% Beat
Q1, 2018 $0.34 $0.38 11.8% Beat
Q4, 2017 $0.39 $0.39 0.8% Beat
Q3, 2017 $0.34 $0.34 0.3% Beat

One question we always consider here at the Bankers’ Tribune is how important are earnings reports to Globant’s stock price performance? It’s more important for some companies than for others. In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2019, the stock price reacted by falling by -1.9%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-15 $100.63 $98.74 -1.9% Decline
2019-05-09 $83.19 $85.49 2.8% Increase
2019-02-14 $68.40 $70.78 3.5% Increase
2018-11-15 $50.79 $53.29 4.9% Increase

Fundamentals And Technical Analysis

Globant is currently trading at $107.18/share, up 2.0% for the day. The company is trading at approximately 95.4% of its 52 week high of $112.33/share. The company’s stock price is up 6.5% since the last earnings report and up 7.6% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 69.83 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

The current share price implies a price-to-earnings (P/E) multiple of 72.6x and a forward P/E multiple of 45.2x.

Globant’s current share price also implies a price-to-book (P/B) multiple of 9.8x. The following table summarizes some other key fundamental ratios:

Data as of November 14, 2019
Metric Value
Last Fiscal Period FY2019.Q2
Period End Date June 30, 2019
Stock Price (Current) $107.18
P/E Ratio 72.6x
P/E Ratio (Fwd) 45.2x
PEG Ratio 1.9
Total Debt to Capital (%) 1.8%
Levered Free Cash Flow zero
Enterprise Value / EBITDA 36.7x

Company Profile: Globant S.A.

Globant S.A. is a mid-cap stock with a market capitalization of $3.851 billion and a total enterprise value of $3.860 billion. The company operates in the Information Technology sector and Software industry.

Globant S.A. operates as a technology services company worldwide. The company offers machine learning, pattern recognition, natural language understanding, future of organizations, customer insight, behavioral change, product innovation, design thinking, product management discovery and delivery, and product coaching services. It also provides process appraisal, automated, process evolution, delivery management, agile consultancy, management consulting, user experience, visual and service, industrial design, consultancy, fast prototyping, app evolution, platform integration, and hardware integration services. In addition, the company offers game engineering and experience, digital platform, virtual and augmented reality, graphics engineering, 3D and 2D art, e-Sports, data architecture, data science, distributed platform, data integration, data visualization, and blockchain services.

Further, it provides Internet of Things experience and consultancy, platform, content management system, e-learning, video content production, digital marketing, OTT, and Cloud Ops Studio services. Additionally, the company offers functional testing, load and performance testing, mobile testing, test automation, large scale Web applications, hybrid and cross-compiled development, accessibility, API management, micro, complex architecture, product security and compliance vulnerability management, application monitoring, software archaeology, IT service management, and software evolution services, as well as services over platforms.

It serves medium- to large-sized companies operating in media and entertainment, professional services, technology and telecommunications, travel and hospitality, banks, financial services and insurance, and consumer, and retail and manufacturing industries.

The company was formerly known as IT Outsourcing S.L. and changed its name to Globant S.A. in December 2012. Globant S.A. was founded in 2003 and is based in Luxembourg City, Luxembourg.

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