Based on the aggregated intelligence of 165,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, business research provider The Advisory Board Co. (Nasdaq: ABCO ) has received a distressing two-star ranking.
With that in mind, let's take a closer look at Advisory Board's business and see what CAPS investors are saying about the stock right now.
Advisory Board facts
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Headquarters (Founded)
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Washington, D.C. (1979)
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Market Cap
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$632.4 million
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Industry
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Research services
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Trailing-12-Month Revenue
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$239.3 million
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Management
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CEO Robert Musslewhite (since 2008)
CFO Michael Kirshbaum (since 2006)
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Return on Equity (Average Past 3 Years)
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18.3%
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Compound Annual Net Income Growth (Over Past 3 Years)
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(25.3%)
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1-Year Return
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62%
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Competitors
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Accenture (NYSE: ACN )
Navigant Consulting (NYSE: NCI )
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Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.
On CAPS, 19% of the 42 members who have rated Advisory Board believe the stock will underperform the S&P 500 going forward. These bears include robertshrestha and All-Star jed71, who is ranked in the top 10% of our community.
Just two weeks ago, robertshrestha strongly advised Fools to stay away from Advisory Board: "Lofty valuation, highly sensitive to weak economy, too dependent on intellectual property, and limited prospects for growth. What's to like?!"
Like its sister company The Corporate Executive Board (Nasdaq: EXBD ) , Advisory Board provides best-practices research and analysis to businesses on a subscription basis. The company differentiates itself, however, by concentrating completely on the health-care industry (because of their non-compete agreement, Corporate Executive Board is prohibited from selling to health-care companies). But while Advisory Board offers a focused and low-cost alternative to multi-industry consultants such as Accenture, Navigant, and Deloitte & Touche, many Fools are concerned that the health-care industry, as a whole, is only looking to slash spending over time. Throw in the stock's already lofty P/E of 56, and it's easy to see why our community believes Advisory Board is a good bet to underperform.
CAPS All-Star jed71 sums up the bear case:
I think they bring some value added to hospitals by providing best practices for a myriad of logistical and operational issues that hospitals face. I was at one point long shares in [Advisory Board] when they first became a public company.
But I believe an investor needs to seriously look at where hospitals will spend their money, given the times we are living in. Hospitals are receiving a decreasing amount of reimbursement from the government for medicaid and medicare services they provide while their expenses to provide those services are increasing at a pretty fast clip. Like it or not, this is going to cause some belt tightening at these institutions and create pressure on "discretionary spend" items. I would definitely consider the outlays made to [Advisory Board] discretionary and not necessary to providing core medical services.
What do you think about Advisory Board, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!
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