Is Shutterfly a Hidden Gem?

With shares of Shutterfly (NASDAQ:SFLY) trading at around $40.40, is SFLY an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

Shutterfly isn’t on the radar of most investors. However, over 8 million shares were traded yesterday as the stock climbed 20.27 percent. This was due to an outstanding earnings report as well as strong guidance. Q4 EPS came in at $1.40 versus an average expectation of $1.01. Q4 revenue came in at $351.8 million versus an average expectation of $309.7 million. This was also a 33 percent increase year-over-year. Most importantly, this was mostly organic growth. Shutterfly has been expanding its customer base by using marketing and mobile tools. A ship-to-shore partnership with Costco Wholesale Corporation (NASDAQ:COST) should also assist growth.

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FY2012 EPS came in at $0.61 compared to $0.40 last year. FY2012 revenue was $640.6 million, which was a 35 percent increase over last year. In 2012, transacting customers increased 31 percent to 7.1 million. Orders increased 29 percent to 16.3 million.

It should also be noted that corporate sales are growing fast. Corporate sales climbed 7 percent to $8.3 million. This is a small segment of the business, but it’s likely to become much larger, which has the potential to help EPS growth in the future. Current corporate customers include UnitedHealth Group Incorporated (NYSE:UNH), AT&T (NYSE:T), and Dell Inc. (NASDAQ:DELL).

As far as guidance is concerned, FY2013 EPS is expected to come in between $0.39 and $0.42 on revenue between $739 million and $746 million. Wall Street had been expecting EPS of $0.46 on revenue of $707.8 million.

Let’s take a look at some important numbers prior to forming an opinion on this stock…