Red Hat reported fourth quarter and full-year results for its fiscal 2017 on March 27, in line with analysts estimates. The company reported adjusted diluted EPS of $0.61 per share for the quarter; analysts were looking for $0.61. Meanwhile, revenue for the quarter came in on $628.8 million; analysts had been looking for revenue of $618.5 million.

The company also guided the fiscal first quarter of 2018 for revenue for a range of $643 million to $650 million; analysts were looking for $642.56 million. Meanwhile, the company expects full-year fiscal 2018 revenue in a range of $2.72 billion to $2.76 billion; analysts had been looking for $2.708 billion. Additionally, GAAP EPS is expected in a range of $1.69 to $1.73 per shares for fiscal 2018, and non-GAAP EPS of $2.60 to $2.64. Analyst had been looking for GAAP EPS of $1.55 and non-GAAP EPS of $2.60. Clearly, gudiance is the driving force for the RHT's jump of 5 percent to $86.41 after hours on Monday through the open of trading on Tuesday.

At the mid-point, the company is projecting GAAP EPS of $1.71 and non- GAAP EPS of $2.62. The non-GAAP EPS of $2.62 implies a 2018 forward P/E for shares of RHT at 33. Additionally, analysts are currently expecting 2019 EPS of $3.02, which is likely too low given RHT boost in 2018 guidance. Assuming that analyst will adjust their models, we will also improve 2019 estimates by the same margin RHT guided over analyst expectations, which works out to 1.1%. That would bring estimates for 2019 up to $3.05, growth of about 16%. Based on the price of RHT and the 2019 numbers, we can say that RHT is trading at 2019 P/E of 28. That gives RHT a growth adjusted PEG ratio of 1.7, which is not cheap.

(Data Complied from YCharts)

The chart above plots out the RHT's revenue growth quarter-over-quarter since the fiscal fourth quarter of 2012. One can see that revenue growth has been very consistent. Additionally, the light blue line is the exponential trend line of that revenue growth, with a forecast for the next five quarters. One can see the R^2 on the revenue line and the trend line is 0.9976, which is very strong. In fact, when we look at the plots on the points chart in the forecast, we can see that it takes us right to the $650 million number RHT is guiding for the first quarter.

(Data Complied from YCharts)

Again, we were able to derive the same type of trend using growth in gross profit in the chart above.

(Data Complied from YCharts)

We can also see that RHT could begin to see increased gross margin as well, which would help to drive further benefits.

When using the revenue forecast in the chart, adding all four forecasted quarters together, we arrive at a revenue forecast for fiscal 2018 of around $2.750 billion, which is towards the top end of the RHT range, and gross profit of around $2.355 billion. If we take the margin of gross profit to net income in fiscal 2017 and 2016, we arrive at 12.3% and 11.4%, respectively. On gross profit of $2.355 billion using a 2017 margin of 12.3%, we arrive at GAAP net income in fiscal 2018 of around $290 million, which is an increase of 14% from this year's $253 million.

RHT's projected growth and trends from the historical perspective seem to check out against the company's guidance. That leaves us with the question of whether it's worth paying for the stock at current levels. Can RHT outperform its raised guidance, which we have already accounted for and duplicated with our forecast. From looking at the numbers and projections, it's tough to say at this point whether RHT can do so. Wall Street is all about expectations, stocks go up only when those expectations get beat. Right now, we can't justify or even make a case that RHT will exceed the current expectations of the market.

The one other thought: RHT is trading levels not seen since the year 2000. It's tough to be bullish on a stock trading at 17-year highs. These might as well be all-time highs, since we are dating the stock back to when there was a clear and obvious tech bubble.

RHT would have to be able to squeeze more revenue or drive more savings and margins to get an unexpected beat in any of its quarters over the next year and push the stock significantly higher from here. There may be better choices out there in the market right now.

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