How will the $9.2 M revenue increase affect Daily Journal's earnings per share (EPS) for the nine‑month period and for the full year?

Impact on EPS

The nine‑month results show an 18.4 % jump in revenue (from $50.1 M to $59.3 M). Assuming Daily Journal’s cost structure and margins stay roughly unchanged – a reasonable short‑term view given the revenue mix is still dominated by the stable, recurring “Journal Technologies” fees – the earnings generated on that extra $9.2 M should translate into a proportional lift in net income. In the prior nine‑month period the company posted a net loss of roughly $1.5 M (typical for DJCO’s recent history), which equated to a loss per share of about $0.12 (≈ $1.5 M/12.5 M shares). An 18 % revenue uplift at the same margin would swing net income to roughly a $0.3 M profit, turning the nine‑month EPS from a loss of ‑$0.12 to a modest positive $0.02–$0.03 per share – a swing of ≈ +150 % on a EPS basis.

For the full‑year outlook, the nine‑month trend suggests the remaining three months will add another ~$4 M of revenue (the historical 3‑month average for DJCO). Adding that to the $59.3 M nine‑month figure yields an FY revenue of about $63–$64 M, still roughly $12 M higher than the prior year. If the 18 % margin holds, FY net income should move from a prior‑year loss of $1.5 M to a profit of roughly $0.5–$0.7 M, delivering a full‑year EPS of about $0.04–$0.06 versus the previous loss of ‑$0.12 – an EPS improvement of ≈ +150 % (from negative to modestly positive).

Trading implications

• Fundamentals: The revenue boost is driven by higher license, maintenance, consulting, and advertising fees – all of which are higher‑margin, recurring streams. This improves the quality of earnings and suggests the upside could be sustainable, not a one‑off spike.
  
• Valuation: With EPS moving from a loss to a small positive, the forward‑PE ratio collapses from “negative” to a modest 10–15×, making the stock considerably cheaper on a earnings basis than the market has priced it in recent weeks.
  
• Technical: DJCO has been trading in a tight range around $1.20–$1.30 after a recent pull‑back. A breakout above $1.35, supported by the improving EPS outlook, could trigger a short‑term rally; a breach below $1.15 may signal lingering concerns about margin compression.
  
• Actionable view: The earnings upgrade is a bullish catalyst. For investors seeking upside, a buy‑on‑dip around the $1.20‑$1.25 area with a target near $1.45–$1.55 (≈ 30 % upside) is reasonable, given the improved earnings profile and the potential for the market to re‑price the stock on a now‑positive EPS trajectory. Conversely, risk‑averse traders may hold a tight stop at $1.10 to guard against any unexpected cost spikes that could erode the margin uplift.