Digital Generation Shares Plunged: 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 Digital Generation (NAS: DGIT) fell nearly 15% in early trading on higher than average volume after reporting a surprisingly large third-quarter loss.

So what:Last quarter, investors sold when revenue came in well short of Wall Street's target. This time, DG's $0.15 per share loss came up well short of the $0.05 a share profit analysts were expecting. Wall Street's target also appears to have accounted for the summer's purchases of MediaMind and EyeWonder, the costs of which cut into earnings.

Now what: I'd love to tell you that sell-off makes DG cheap, but today's action puts the stock right back where it was three months ago: trading for half analysts' long-term earnings growth projections. If only we could trust their guesses. After consecutive misses, I don't see the logic in doing so. Do you agree? Or would you buy shares of Digital Generation at current prices? Please weigh in using the comments box below.

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At the time thisarticle was published Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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