Why Bankrate's Shares Plunged

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of personal-finance website Bankrate (NAS: RATE) got hammered today, falling as much as 27% in intraday trading after the company reported first-quarter results.

So what: It's a little hard to know what to do with investors' reaction to Bankrate's first-quarter numbers. For the quarter, revenue jumped 26% from the prior year, while net income doubled. On an adjusted basis, earnings per share climbed 38% year over year to $0.18. To be sure, that $0.18 tally missed analysts' estimates, but only by $0.01.


Now what: When a company's shares dive like this on earnings news, it's very often a matter of poor forward guidance. But Bankrate's full-year view shouldn't have shocked shareholders -- the projection of revenue growth "in the mid-20% range" and "EBITDA margins in the lower 30% range" was the same as what the company offered back in February. So what's the story, then? It could be simply that with shares currently -- that is, after today's drop -- trading at 24 times expected 2012 earnings, investors thought they needed a bigger, better quarter and perhaps a boost to full-year guidance.

In that light, there may be reason for some chagrin, but Bankrate's first quarter still looked pretty solid.

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At the time this article was published Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributorMatt Koppenhefferhas nofinancial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting hisCAPS portfolio, or you can follow Matt on Twitter,@KoppTheFool, or onFacebook. The Fool'sdisclosure policyprefers dividends over a sharp stick in the eye.

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