Red Hat Inc.'s stock jumped higher this week after the company reported its second quarter results.
"Revenue climbed 12 percent to $183.6 million, topping the $179.4 million expected by analysts… The company had a 15 percent jump in subscription revenue, fees for the use and maintenance of its software," writes Bloomberg's Connie Guglielmo. "Subscriptions accounted for 85 percent of sales. Red Hat also said the average length of contracts signed in the quarter increase to 22 months from 19 months in the previous three months."
"Red Hat stock has experienced enormous multiple expansion during its 109% climb this year," notes Tiernan Ray of Barron's. "The stock now trades at 45 times the 62 cents per share in earnings projected for the fiscal year ending February 2010, excluding some costs, and 38 times the 73 cents projected for 2011. A year ago, the multiples were 29 times and 25 times, respectively."