Symbol not found

:FEYE   00:00AM GMT
0.00 (0.00%)
StockTwits Share  Twitter Share  Facebook Share

Why FireEye is on the Brink of Something Huge


FireEye, Inc. (FEYE)
53.1047 -0.0153 (-0.03%)
Sector: Information Technology
Published by Capital Market Laboratories on 2015-06-16

What does the rating mean?
3-Month Stock Move: +26.3%
6-Month Stock Move: +85.9%
12-Month Stock Move: +46.4%
30-day Option Implied Volatility: 42.0%
Implied Stock Range: ($48.00, $58.20)
What does "implied stock" mean?

Written by Ophir Gottlieb, 6-16-2015

FireEye lives in the world of cyber security and the stock has a tendency to move every time there is news of a major breach or hack (remember Sony and the move "The Interview."). But there's a lot more going on than reactive news, there's growing business. Some would say, there's a booming business. But, others would say it's not a business that's booming, rather its a revenue machine that for every dollar that comes in costs $2 going out. I'll show you both sides, and let you decide if FEYE is truly ready to boom, or if it's going to forgotten if this economic cycle we're in starts to turn.

Earnings Date EPS Revenue (Mean) Revenue (Median) Last Quarter (Actual)
2015-08-04 $-0.88 $142.8 M $142.7 M $125.4 M Provided by ZACKS

Here are the core fundamental factors driving the company's two star fundamental rating.

Fundamentals Rating Summary

Revenue (TTM US$ Millions) 477 207 98

Operating Margin (QTR) 0.486 0.41 0.54 RISING

Net Income (TTM US$ Millions) -477 -195 -57

Levered Free Cash Flow (TTM US$ Millions) -74 -100 RISING

Research and Development (US$ Millions) 66 42 10 RISING

Research and Development Expense/Revenue 0.523 0.567 0.354 FALLING

Stock Returns and Chart

FEYE is up +26.3% over the last three months and up +85.9% over the last six months. The stock price is up +46.4% over the last year. So, the stock market "likes" FEYE, a lot.

Before we dig into the fundamental trends that drive the rating, let's look at a two-year stock chart with regression channel and 10-day momentum (on the bottom).
Click here to interact with this stock chart

Now let's examine the visualizations of the critical financial measures.

Revenue (TTM US$ Millions) 47720798

This is the best news for FEYE bulls. Revenue is exploding and trending, or in Engish, it has seen revenue (TTM) rise for every quarter it has been public, breaking new all-time highs each time. As of today the firm stands at revenue in the trailing-twelve-months just under half a billion dollars.

When a company grows revenue 130.33% year-over-year, we must recognize the added importance of top-line growth, perhaps even above and beyond earnings, free cash flow and margins. Regardless of the low 2 fundamental (star) rating, if revenues continue to explode, everything could follow suit for FEYE.

What do all these numbers mean?
FEYE's fundamental rating benefited these results:
1. The one-year change was positive.
2. The one-year change was greater than +20% (an extra boost to the rating).
3. The two-year change was positive.
Finally, the up trend (consecutive quarters) in revenue benefited the fundamental (star) rating.

Let's look at Revenue (TTM US$ Millions) in the chart below.

Click Here to Interact With This Chart

Net Income (TTM US$ Millions) -477-195-57

Net Income is essentially the exact opposite of of revenue. Losses have broken new all-time lows for five consecutive quarters. The firm now stands at an annual loss of $476 million, which is basically exactly the revenue number of $477 million. In English, for every dollar of revenue FEYE generates, it pays $2 for it.

Click Here to Interact With This Chart

Research and Development (US$ Millions) 664210RISING

Normally I turn to free cash flow, but for FEYE it looks like net income and doesnt add a lot to the conversation. What does add to the conversation is an examination of research and development (R&D).

Research and Development (US$ Millions) in the most recent quarter for FEYE was $66 million. R&D is up 56.31% year over year and 552.01% from two-years ago when the firm spent just $10 million.

In our final time series chart we plot Research and Development (US$ Millions) in the blue bars.

Click Here to Interact With This Chart

FireEye has seen revenue absolutely explode to now $477 million. At the same time, earnings (losses) have imploded to basically the same number (-$476 million). Add to that narrative R&D increasing over 500% and what you have is a firm that is very much on the brink of something big. That "big" could be a wonderful company and wonderful earnings. That big could also be a dud. For now, with revenue growing that fast, perhaps the unbiased observer sides slightly with the bull argument... slightly.

Get a Trade Card just like this for ANY company by simply entering the symbol: