Why Shares of Ebix Inc. Surged Today

By Markets Fool.com

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Continue Reading Below

What: Shares of Ebix , a software provider to the insurance industry, soared on Friday after soundly beating analyst estimates for its fourth-quarter earnings. By 3 p.m., the stock was up 17%.

So what: Ebix reported $60.6 million in revenue for the quarter, up 19.2% year-over-year and beating analyst expectations by nearly $8 million. Much of this revenue growth was due to a series of acquisitions made throughout 2014, including Oakstone, Vertex, and i3. Ebix spent a total of $59 million on acquisitions during 2014.

Ebix reported EPS of $0.45, up from $0.40 during the fourth quarter of 2013 and six cents better than analyst expectations. The company managed an operating margin of 34.7%, down slightly year-over-year. Going forward, the company intends to grow the business both organically and through acquisitions.

Now what: While much of Ebix's growth was the result of acquisitions, making the 19.2% jump in revenue likely a one-time event without further acquisitions, Ebix is a wildly profitable software company that actually deserves its valuation. More impressive than the revenue beat was the fact that the company maintained its extremely high margins.

With slow organic growth coupled with the potential for further acquisitions, an extremely high operating margin, and a P/E ratio of about 18, Ebix is a company that deserves a closer look from investors.

Continue Reading Below

The article Why Shares of Ebix Inc. Surged Today originally appeared on Fool.com.

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.