Multi-Color Corporation (LABL) recently delivered better-than-expected estimates for its fiscal 2014 fourth quarter as both revenue and EPS came in above the Zacks Consensus Estimate.
This prompted analysts to revise their estimates meaningfully higher for both fiscal 2015 and 2016, sending the stock to a Zacks Rank #1 (Strong Buy).
While shares of Multi-Color Corporation have risen since the Q4 report, there seems to be plenty of upside potential left given reasonable valuation metrics and strong growth projections.
Multi-Color Corporation provides various labels for brands that make home and personal care, wine and spirit, food and beverage, healthcare and specialty consumer products.
Fourth Quarter Results
Multi-Color Corporation reported better-than-expected results for the fourth quarter of its fiscal 2014 on June 13. Adjusted earnings per share came in at 68 cents, beating the Zacks Consensus Estimate of 60 cents. It was a 21% increase over the same quarter last year.
Net revenues rose 15% year-over-year to $193.5 million, which was ahead of the consensus of $192.0 million. This revenue increase was driven by acquisitions. Organic revenue saw a 3% increase in volume, which was offset by an unfavorable impact of sales mix and pricing, and foreign currency headwinds.
Adjusted gross profit as a percentage of net revenue declined slightly to 20.3%. Adjusted selling, general and administrative expenses increased slightly, from 7.9% to 8.1% of net revenues. The lower gross margin and higher S,G&A expenses led to a 30 basis point decline in the adjusted operating margin to 12.3%; however, adjusted operating income was still up 12% year-over-year.
Estimates Rising
Following the Q4 earnings beat, analysts revised their estimates meaningfully higher for both fiscal 2015 and 2016. This sent the stock to a Zacks Rank #1 (Strong Buy).
The 2015 Zacks Consensus Estimate is now $2.55, up from $2.35 before the Q4 report. The 2016 consensus is currently $2.85, up from $2.65 over the same period.
These estimates correspond with 19% EPS growth in fiscal 2015 and 12% growth in 2016.
Valuation
The valuation picture looks reasonable for Multi-Color Corporation. Shares trade around 15x 12-month forward earnings, which is a discount to the industry median of 18x.
The stock also sports a free cash flow yield around 8%.
The Bottom Line
With strong earnings momentum, solid growth projections and reasonable valuation, shares of Multi-Color Corporation offer attractive upside potential.
Todd Bunton, CFA is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.
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