Castlight Health, Inc. CSLT is set to report third-quarter 2015 results on Nov 4. Last quarter, the company posted in-line results. Let us see how things are shaping up for this announcement.
Factors to Consider
Castlight Health operates as a provider of cloud-based software. It enables enterprises to gain control over their rapidly escalating health care costs.
The company reported encouraging second-quarter results. Revenues increased on a year-over-year basis and the reported loss also narrowed from the year-ago figure. Results were driven by higher renewals and new client additions. Subscription revenues during the quarter came in at $17.3 million, up 80% on a year-over-year basis.
Castlight Health’s gross margin for the second quarter was 55%, up from 21.4% reported in the year-ago quarter. The year-over-year growth in gross margin was primarily due to a higher revenue base.
Furthermore, significant investments in growth areas for improving implementation timelines, particularly with upsell products will boost profitability going forward.
Earnings Whispers
Our proven model does not conclusively show that Castlight Health is likely to beat the Zacks Consensus Estimate in the upcoming release. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: The Earnings ESP for Castlight Health is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 21 cents per share.
Zacks Rank: Castlight Health has a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies, which are worth considering, as our model shows that they have the right combination of these two elements:
CDW Corporation CDW, with an Earnings ESP of +2.63% and a Zacks Rank #2 (Buy)
CenturyLink, Inc. CTL, with an Earnings ESP of +1.45% and a Zacks Rank #2
CyberArk Software, Ltd. CYBR, with an Earnings ESP of +10.00% and a Zacks Rank #2
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