Why Shares of Shutterfly, Inc. Popped 25% Today

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What happened

Shares of online customized product retailer Shutterfly, Inc. (NASDAQ: SFLY) jumped as much as 24.7% in trading Wednesday after the company reported earnings and a large acquisition. As of 12:30 p.m. EST, shares were holding at about a 19.8% gain on the day.

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So what

Revenue rose 6% in the fourth quarter of 2017 to $593.8 million, and net income jumped 22.8% to $111.7 million, or $3.37 per share. This easily topped management's own guidance of $538 million to $568 million in revenue and $2.60 to $3.00 per share in earnings given only three months ago.

The company also announced that it's acquiring school photography company Lifetouch for $825 million in cash. This should leverage the company's digital platform and manufacturing capabilities. In the last fiscal year, Lifetouch generated $111.3 million in EBITDA, so the multiple is about 7.5 times EBITDA.

Now what

Revenue growth may not have been all that impressive last quarter, but Shutterfly is executing well, expanding margins, and improving the bottom line. And the acquisition of Lifetouch is something the company can likely use to draw more customers and create additional spend per customer. Guidance for net income of $1.94 to $2.38 in 2018 means shares trade for at least 27 times earnings, which isn't cheap, but may be a good deal for long-term investors if the company keeps growing.

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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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