Why Web.com Shares Hosted Big Gains

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 Web.com rose more than 10% this morning -- and are still up around a 9% gain -- after the company surprised the Street with better-than-expected quarterly results and solid guidance for the rest of 2013.

So what: Web.com reported $128.1 million in adjusted revenue and $0.48 in earnings per share, against consensus expectations of $127.7 million on the top line and $0.45 in EPS. The company is also projecting that it will generate between $130 million and $131 million in adjusted revenue, which is in line with the consensus of $130.5 million, and adjusted EPS in the range of $0.48 to $0.49, which slightly exceeds the $0.48 consensus.

Full-year revenue projections of $526 million to $533 million hit Wall Street's $529.6 million consensus in the middle, but full-year EPS projections in the $2.00 to $2.05 range are better than the $1.99 Street consensus. The EPS guidance seems to be a major cause for the pop, as it's the clearest indication of positive momentum out of this report.

Now what: Web.com would be valued at a P/E of 9.7 on an adjusted basis, but it remains unprofitable in GAAP terms. The company's cash flow does remain positive, but its debt load remains extremely high -- it's a full three-quarters the size of Web.com's market cap -- and that could cause big problems down the road if debt terms take a turn for the worse, or if growth happens to stall out.

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The article Why Web.com Shares Hosted Big Gains originally appeared on Fool.com.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.The Motley Fool has no position in any of the stocks mentioned. 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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