Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.


5 Suggests a Detour

Uh-oh. This is gonna be bad.

Years of experience deciphering PR-ese have taught me that this is the appropriate reaction to an "earnings" release that leads off with a line like: "Company Achieves Record Revenue as Network Expansion Accelerates." I added the emphasis, because as I just mentioned,'s (Nasdaq: TSCM  ) Q3 news yesterday was supposed to take the form of an earnings release -- not a revenue release. When the best thing a company can say about its quarter is that it sold a lot of stuff, a Fool has to worry about how much it earned on all that stuff.

Well, how much did it earn?
At first glance, it earned a lot. Q3 earnings came in at a hefty $0.67 per share -- up sixfold from last year's Q3. That's better than the 41% at Morningstar (Nasdaq: MORN  ) . Unfortunately, $0.54 of's profit wasn't derived from operations, but from "the recognition of a deferred tax asset on a portion of the Company's net operating loss benefits."

Without that tax credit, the firm would have grown its per-share profits a mere 18% on 24% revenue growth -- implying both stock dilution and a deteriorating profit margin. And actual cash profits looked even worse. The company generated just $0.8 million in free cash flow for the quarter -- its worst showing since September 2005.

Also disconcertingly, revenue growth during Q3 slowed from the pace set in the first half of 2007. While a deceleration from 25% to 24% may not sound like much, it really is. Remember: bought itself a new subsidiary during Q3, and this acquisition brought with it $2.3 million in revenue, post-acquisition. Back out that inorganic growth, and you'll see that organic revenue growth was a mere 6% last quarter. (Ouch.)

And how much did it spend?
I'll say one thing for the -- these guys aren't stingy. Unable to grow much on its own, the firm continued to pay up to buy other people's growth. In addition to the $20.7 million spent to acquire Corsis, it paid $25 million for "Bankers Financial Products Corp ... a provider of the best bank rates online" -- a claim with which I suspect (Nasdaq: RATE  ) would quibble.

Fortunately, not everything costs money. hooked up with Viacom's (NYSE: VIA.B  ) "mtvU ... to distribute Personal Finance and Educational content to ... more than 550 online college newspapers." And as fellow Fool Rick Munarriz described in September, also inked a partnership with Time Warner's (NYSE: TWX  ) AOL, to try and get the shy and retiring Jim Cramer some much-needed public exposure.

Now there's an idea.

Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 539984, ~/Articles/ArticleHandler.aspx, 10/26/2016 1:31:22 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,200.53 31.26 0.17%
S&P 500 2,139.91 -3.25 -0.15%
NASD 5,257.08 -26.32 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/26/2016 1:14 PM
TST $0.94 Down +0.00 +0.00%
TheStreet CAPS Rating: *
MORN $71.46 Up +0.12 +0.17%
Morningstar CAPS Rating: ***
RATE $8.03 Down -0.08 -0.93%
Bankrate CAPS Rating: **
TWX $88.22 Up +1.06 +1.22%
Time Warner CAPS Rating: ***