Stitch Fix, Inc. [NASDAQ: SFIX] announced its Q3 results on Wednesday, and it beat all analysts’ expectations. The company announced net revenues of $408.9 million beating analyst expectations of $398 million. The company’s earnings per share also beat analyst expectations by a significant margin. Analysts were expecting -0.03 per share, while the company beat this to return $0.07 per share. Customer numbers also grew in the last quarter to hit 3.1 million.
In spite of this, the stock rose and then retraced within Wednesday’s trading session. It’s clear that investors bought the expectation and sold the news. From a look at the charts, Stitch Fix, is trading below the 100-day MA at $25.62, which is now a key resistance level on monthly charts. On the daily charts, Wednesday’s high of $24.25 could be an area of resistance when markets open. If it fails to break above this level, then Stitch Fix could trade in the red, or possibly consolidate in Thursday trading. But if the pre-market price action is anything to go by, it could be a bullish day for Stitch Fix. Stitch has already broken this level in pre-market and is trading above $30.
Besides, its strong showing in pre-market trading, the fundamentals still remain strong. This company has managed to beat analyst expectation consistently for 4 consecutive quarters. Its books also paint the picture of a healthy organization. For instance, the company’s quarterly revenue growth (yoy) stands at 25.10%. This is in-line with the company’s growing customer numbers.
Stitch Fix appears as though it is well capitalized to meet all its operational needs, and take advantage of any investment opportunities that may arise. This is evident in its operating cash flow of $96.11 million, a positive indicator that it is well covered in terms of meeting its expenses. With a levered free cash flow of $47.07 million, the company is well positioned to take advantage of emerging opportunities. This is further enhanced since the company has quite a high levered free cash flow and it means that the company is in a good position to leverage for growth if need be.
The company’s records also indicate that its management is effective in its handling of the company’s resources. This is quite clear in its return on equity, which stands at 16.15%. An efficient management is a solid ground for the long term growth and sustainability of this company.
All these factors make Stitch Fix a company that is standing on solid ground. However, when it comes to trading remember to always judge a stock by its chart.