Cloud-based payment services provider Bottomline Tech (click ticker for report: EPAY) reported better-than-expected fiscal fourth quarter results Thursday.
Total revenue jumped 13% from the same period a year ago, while subscription and transaction revenue increased an impressive 64%. Though the company reported a net loss for the quarter of $0.03 per share, core earnings per share—which excludes acquisition-related expenses, intangible amortization, restructuring costs, and equity-based compensation—came in at $0.26, significantly above market expectations. Core net income during the quarter, however, declined on a year over year basis, to $9.1 million. Still, we were very encouraged by management’s commentary about the strength of its backlog and pipeline heading into fiscal 2013 and are big fans of its subscription and transaction-based business model, which continues to grow. The strong report prompted a 20% move higher in the shares Friday, and we’re growing more constructive on our technical assessment of the company as a result. But while we intend to make a number of adjustments to our valuation model after the quarter, we believe shares are still trading within our fair value range.
Nonetheless, we think investors should keep an eye on Bottomline, particularly given the better-than-expected fundamental performance, substantial top-line growth trajectory, strong backlog and pipeline heading into fiscal 2013, solid subscription-based business model, and more constructive technical outlook. However, we still prefer eBay (click ticker for report: EBAY) via its exposure to PayPal in the portfolio of our Best Ideas Newsletter, as the company registers a perfect 10 on our Valuentum Buying Index (our stock-selection methodology).