Foolish Forecast: Riding the optionsXpress

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Online options broker optionsXpress (Nasdaq: OXPS) reports its third-quarter 2007 numbers tomorrow. Think quick: Buy, sell, or hold?

What analysts say:

• Buy, sell, or waffle? Eight analysts follow optionsXpress, giving it three times as many buy ratings (six) as holds (two).
• Revenue. On average, analysts expect to see revenue spike 40% to $61.4 million.
• Earnings. Profits are predicted to rise even faster, up 46% to $0.38 per share.

What management says:
The big news at optionsXpress this quarter came in August, when CEO David Kalt announced he would be exiting stage left, effective Sept. 30. When we hear from management tomorrow, it will be former CFO, former president, and now newly minted CEO David Fisher speaking on the company's behalf. Commenting on the news, the team at Motley Fool Stock Advisor (where we have recommended the company) seemed less than satisfied with management's explanation for Kalt's departure: a desire to "pursue other, earlier-stage entrepreneurial business opportunities." With barely $200 million in trailing revenue, optionsXpress seems anything but a mature business. Rivals TD Ameritrade (Nasdaq: AMTD) and E*Trade (Nasdaq: ETFC) are respectively 11 and four times its size; Schwab (Nasdaq: SCHW) is more than 20 times. Oh well. At least it's a change from the old "I want to spend more time with my family" line.  

What management does:
More reassuring than Kalt's explanations are the numbers being produced at the company he's left behind. At both the gross and net margin levels, profitability per dollar of revenue has been on the rise for the last few quarters.

Margins	3/06	6/06	9/06	12/06	3/07	6/07
Gross	85.3%	85.0%	84.9%	85.4%	86.3%	87.4%
Net	38.4%	38.5%	38.3%	38.4%	38.4%	38.7%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
So should the CEO's departure concern investors? Our team at Stock Advisor thinks not. Musing that Kalt's move may have had something to with "the oft-theorized sale of the company to a bigger brokerage and perhaps some strategic differences regarding the matter," the latest update for Stock Advisor members argues that "the company will be fine with the change" in leadership. Three weeks after he vacated the CEO's chair, Yahoo! Finance shows no sign of Kalt dumping his shares (he owns a 4.3% stake). To the contrary, one week before leaving, Kalt exercised some stock options to increase his stake in the company, and he appears to be holding onto those shares.

While nothing's certain, the ex-CEO's faith in the company under its new management may give outside investors some reassurance.

For more on optionsXpress, read:

• Quick Take: optionsXpress's X-Factor
• optionsXpress CEO Opts Out
• optionsXpress Is in the Money