Aspen Technology Shares Popped: What You Need to Know

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 Aspen Technology (Nasdaq: AZPN  ) surged more than 23% in early trading but have since given back almost half that gain. Investors were impressed with the company’s fiscal fourth quarter results.

So what: Revenue soared 38% to $52.6 million, resulting in an adjusted net loss of $0.20 a share. Analysts had been expecting a $0.22 a share loss on $47.48 million in revenue, according to data compiled by Yahoo! Finance. Nice beat, right?

Now what: Don’t expect Fools to be impressed. Many are skeptics of the company, which competes with Honeywell (NYSE: HON  ) and SAP (NYSE: SAP  ) , among others, in providing software for aiding manufacturing processes. The 75 who’ve rated the stock give it just one of five stars in Motley Fool CAPS. Falling margins could be partly to blame. Either that or a history of losses that shows no signs of reversing. Do you agree? Would you buy at these levels? Weigh in using the comments box below.

Interested in more info on Aspen Technology?Add it to your watchlist.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn’t own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

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  • Report this Comment On August 25, 2011, at 10:40 AM, enlightened2 wrote:

    Please, Tim/Seth and whoever else writes articles for this website...I implore you to do a little research on this company before giving any more faulty advice to you readers! This is the second article from a "Fool" contributor that shows a complete lack of understanding of the facts and circumstances around this company. How does a company that is showing "no signs of reversing a loss" increase operating cash flows by 64% year over year? This seems like a positive trend to me.

    Please listen to me - I will enlighten you, since you clearly need some help. Revenue doesn't make sense for this company. This is because they had an upfront software revenue model (again, an expert stock evaluator for the hi-tech industry should have some knowledge of how revenues are recognized) that was changed to a subscription model. That means in the early years of the transition, revenue (which drives the income statement metrics you are utilizing) isn't useful. Maybe you should use some other metrics to evaluate this company - if you know of any other besides EPS and GM%. That is what the bankers who are following the company are doing. Oh and by the way, this isn't the first company to have a revenue model change - CA, Inc went through the same transition in the early 2000's. If you don't believe me, pull some of their earlier filings.

    You are continuing to give the Motley Fool a bad name with your lack of due diligence. Do people actually pay for this faulty advice?

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