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Donnelley Financial Solutions Q3 Earnings: Buying Soaring NYSE:DFIN Stock Before Call?

in EARNINGS/INVESTING IDEAS by

Donnelley Financial Solutions, Inc. (NYSE:DFIN) is scheduled to report Q3 earnings results on November 4, 2020.

The company is expected to report earnings of $0.24/share on revenue of $193.4 million. The consensus earnings per share (EPS) of $0.24/share is based on a poll of 5 analysts and represents a growth in eps of 83.1% over the same quarter last year, when the company reported earnings of $0.13/share.

The revenue forecast of $193.4 million based on a poll of 5 analysts implies a year-over-year (YoY) decline in revenue of −1.3%. Last year the company reported $195.9 million in revenue for the quarter.

Expected to report EPS growth of 83.1% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $193.39 $195.90 −1.3%
EPS $0.24 $0.13 83.1%

Earnings Call Trends

Historically, management has exceeded analyst expectations 5 out of the last 8 tracked quarters, and missed expectations 3 quarters.

What are your expectations from Donnelley Financial Solutions, Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.27 $0.87 221.9% Beat
Q1, 2020 $0.06 $0.21 226.7% Beat
Q4, 2019 $0.10 $0.22 128.6% Beat
Q3, 2019 $0.24 $0.13 −44.8% Missed
Q2, 2019 $0.71 $0.74 4.5% Beat
Q1, 2019 $0.09 $0.06 −32.9% Missed
Q4, 2018 $0.15 -$0.06 −140.7% Missed
Q3, 2018 $0.20 $0.27 34.9% Beat

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, 2020, the stock price reacted by increasing 23.1%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 5, 2020 $9.85 $12.13 23.1% Increase
May 7, 2020 $6.96 $7.87 13.1% Increase
February 26, 2020 $8.40 $8.52 1.4% Increase
November 5, 2019 $11.43 $9.56 −16.4% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.96, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.96 implies a 0.2% chance of earnings manipulation.

Fundamentals And Technical Analysis

Donnelley Financial Solutions, Inc. is currently trading at $13.24/share, up – for the day. The company is trading at approximately 88.6% of its 52-week high of $14.87/share. The company’s stock price is up 9.2% since the last earnings report and down −5.9% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 51.89 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:DFIN Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 18.28 and a forward P/E multiple of 8.84.

Donnelley Financial Solutions, Inc.’s current share price also implies a price-to-book (P/B) multiple of 1.66. The following table summarizes some other key fundamental ratios:

Data as of October 28, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $13.24
P/E Ratio 18.3x
P/E Ratio (Fwd) 8.8x
PEG Ratio −0.3
Total Debt / Total Capital 49.1%
Levered Free Cash Flow $61.6 million
EV / EBITDA 9.3x

Finbox

Donnelley Financial Solutions, Inc. is a small-cap stock with a market capitalization of $447.9 million and a total enterprise value of $841.7 million. The company operates in the Financials sector and the Capital Markets industry.

Donnelley Financial Solutions, Inc. operates as a risk and compliance solutions company in the United States, Europe, Asia, Canada, and Latin America. The Company provides regulatory filing and deal solutions through its software-as-a-service; and technology-enabled services, and print and distribution solutions to public and private companies, mutual funds, and other regulated investment firms to serve their regulatory and compliance needs. It offers technology-enabled filing solutions for corporate clients within its capital markets offerings that allow U.S. public companies to comply with applicable U.S. Securities and Exchange Commission regulations, including filing agent services, digital document creation, and online content management tools that support their corporate financial transactions and regulatory reporting; solutions to facilitate clients’ communications with their shareholders; and virtual data rooms and other deal management solutions. The company also provides technology-enabled filing solutions for alternative investment and insurance investment companies, including cloud-based tools for creating and filing regulatory documents, as well as solutions for investors designed to improve the speed and accuracy of their access to investment information. Donnelley Financial Solutions, Inc. was founded in 1983 and is headquartered in Chicago, Illinois.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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