Shares Up 8.57 Percent Friday; as Company Rated with "BUY" Rating from Dutton Associates
In a recent Research Note; the Analyst noted that the Dutton fiscal 2007 revenue estimate remains $45.8 million.
However, Dutton has raised its expense projection to include one-time costs associated with the closing of a seasonal scoring center and downsizing activity as a result of the expiration of a large contract at the end of July. Dutton estimates that will contribute approximately $8 million to $9 million to fiscal 2007 revenue.
In fiscal 2008, Dutton projects a modest revenue decline year over year due to the contract expiration. We expect much of the lost revenue to be offset by revenue contributions from new contract wins, but we are not assuming incremental revenue beyond that.
However, the Company’s bidding activity is, and we believe will continue to be, high, and it has had notable contract wins so far this year.
Despite our projection of lower revenue in fiscal 2008, we expect the year’s earnings per share to increase significantly for three reasons. First, management projects that amortization of intangible assets acquired from Questar Educational will decline roughly $1.7 million to $960,000 in fiscal 2008 from approximately $2.6 million in fiscal 2007.
Second, we expect expenses to be well controlled as management takes advantage of significant opportunities to eliminate redundancies, hold down costs, and achieve greater operating efficiencies.
And, third, we expect Questar Assessment’s operations to generate cash in excess of capital requirements in fiscal 2007 and fiscal 2008 and look for some of this cash to be used to repay debt, reducing interest expense.
Management’s four-year goals include revenue of $100 million. It projects that approximately 70% of growth during the coming four years will be internal, with the balance contributed by acquisitions.
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