Why Diamond Foods' Shares Popped

Why Diamond Foods' Shares Popped

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 Emerald Nuts maker Diamond Foods jumped 20% today after the company settled a lawsuit

So what: Diamond announced a proposed $96 million settlement relating to accounting troubles. The settlement would be paid with $11 million in cash and 4.45 million shares of stock.

Potentially better news was that the company said it sees fiscal fourth-quarter revenues being between $196 million and $201 million, well above the $187 million analysts expected.

Now what: Long-term, the improved financial results will mean the most because they could help the company reduce leverage. But the proposed settlement was also about 25% to 40% of what plaintiffs thought was possible, so if it holds up, the settlement may be a good deal. I think the company's improved financial outlook will help, but I'd like to see much lower leverage before buying in.

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The article Why Diamond Foods' Shares Popped originally appeared on Fool.com.

Fool contributor Travis Hoium has no position in any stocks mentioned. 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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