Tech stocks in general have had a hard time over the last few years, but perhaps none so much as Dye & Durham (TSX:DND). DND stock started to drop even before the crash in tech stocks. Now, years later, it has dropped again after earnings. But does this mean there’s an opportunity for investors? Or should they stay away?
What happened
Shares of DND stock fell after reporting earnings that didn’t meet estimates. The company surpassed its fourth-quarter revenue guidance, and its annual recurring revenue (ARR) was up 117% to $104 million. However, there were other problem points.
Q4 saw revenue fall 9.5% million, or 7% year over year, with net income at a loss of $89.2 million. This decline primarily came down to the impairment charge on an asset held for sale at $66.7 million.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) also fell 13% year over year. Then, there was the full-year to look over. Revenue, net income, and adjusted EBITDA were all down. DND stock now operates at a loss of $170.6 million, down $178.5 million from the year before. All together, the lower performance caused shares to fall by about 17% when earnings came out.
Management weighs in
Management stated that they believed Q4 performance showed strength and resilience as it met the provided guidance. The company continues to seek larger firms, while still tracking growth through small and medium law firms.
“At the same time, the improvements we have made to our go-to-market strategy have rapidly accelerated the amount of ARR in our business. We remain focused on expanding our wallet share across the large and growing legal market we serve today, while diversifying our business mix.”
Matt Proud, CEO of Dye & Durham.
But, is hope for the future enough?
What should investors think?
As mentioned, DND stock has had quite a few problems over the last few years. Unfortunately, these latest results are just more bad results. In fact, it has marked yet another quarter that substantially missed analyst estimates.
The company might offer a dividend, but it remains at just 0.38% as of writing. It also trades at a valuable 3 times sales and 2.1 times book value. However, this isn’t enough to push back the 240% debt-to-equity ratio that the company continues to struggle with.
Because of this, investors seeking growth in the tech sector need to be careful. Just because a company falls into oblivion doesn’t mean it’s a cheap stock to pick up. In fact, many times there is a reason for the stock falling, and it’s important to understand those reasons in full.
Bottom line
DND stock fell 17% after fourth-quarter earnings, with annual earnings not fairing much better. Because of this, the company has managed to continue its downturn with not much to show for the future.
Therefore, if you’re hoping to find valuable tech stocks, I would consider going elsewhere instead. Certainly DND stock could come back in the future, and that could be sooner as opposed to later. However, right now that doesn’t look too likely.
