Advisory Board Shares Jumped: What You Need to Know

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 research and consulting specialist The Advisory Board (NAS: ABCO) were soaring today, gaining as much as 27% in intraday trading after the company announced results for its fiscal second quarter.

So what: The Advisory Board's results are a bit tough to decipher since the company likes to report non-GAAP earnings per share -- which largely adjust for big share-based compensation, a practice I'm not terribly keen on. On a GAAP basis, though, the company's bottom line was flat with last year at $0.30 per share, which appeared to badly miss analysts' targets. Revenue of $92.9 million, however, was up 31% from last year and edged out the $91.4 million that Wall Street was looking for. The company's total contract value -- a top-line performance measure that the company tracks -- was also up 30%.

CEO Robert Musslewhite was bullish on the quarter and the value that the company is creating for its customers in the health-care field.

Now what: Investors obviously reacted well to The Advisory Board's numbers, and that was no doubt helped by the fact that the company bumped up its outlook for the full year and got an upgrade nod from broker Stifel Nicolaus. Investors, though, may want to focus on the company's ability to turn its increasing sales into profits that end up shareholders' pockets. The company's cash flow is much stronger than its bottom line, but capital spending and acquisitions have eaten up much of that cash in recent years.

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