Quotient Technology’s Strong Risk-to-Reward Makes for an Intriguing Look
Digital marketing has become critical for companies looking to expand their online presence. A small-cap digital solutions stock that looks intriguing after a recent period of selling is Quotient Technology Inc (NYSE:QUOT), down 25% over the past three months and up 12% year-to-date, underperforming the S&P 500.
QUOT stock is down at key technical support levels at around $12.00 after trading at just below $18.00 in August 2017.
The chart shows Quotient Technology stock attracting buyers at around $12.00, which could set up a rally back toward $18.00, representing a 50% potential return.
Chart courtesy of StockCharts.com
Some of you may be familiar with the company’s “Coupons.com” web site, which helped launch Quotient Technology toward becoming a provider of digital solutions for retailers.
At the current price level, QUOT stock looks oversold and deserving of a bounce.
The fact Quotient Technology is delivering strong revenue growth and is highly profitable yet experiencing share price deterioration is somewhat puzzling.
Fundamentals Support Bull Thesis for QUOT Stock
Revenues increased in two consecutive years from $221.76 million in 2014 to $275.19 million in 2016.
The revenue growth rate improved from 7.23% in 2015 to 16% in 2016 and the outlook looks encouraging.
Quotient Technology is expected to ramp up revenues by 16.8% to $321.47 million in 2017 followed by an even better 20% to $385.92 million in 2018. (Source: “Quotient Technology Inc. (QUOT),” Yahoo! Finance, last accessed December 14, 2017.)
The company is also profitable with earnings expected to rise to $0.15 per diluted share in 2017 and a 247% increase to $0.52 per diluted share in 2018. There is a high estimate calling for Quotient Technology to make as much as $0.62 per diluted share in 2018.
The EPS trend is positive, which helps support the underlying fundamentals and a catalyst for QUOT stock to advance higher.
The balance sheet is absent of debt and has about $2.00 per share in free cash. This healthy condition will allow Quotient Technology to develop without the fear of a cash crunch.
As I previously mentioned, QUOT stock is hovering at decent support at around $12.00. The stock could retrench from here towards $10.00 but my view is that the risk-to-reward at the current price is an enticing entry point.