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Insituform Shares Got Crushed: 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: With Congress gearing up to spend another big chunk of your tax dollars on "stimulus" and "infrastructure," you'd think happy days would be here again for novel pipe-laying tech play Insituform Technologies (Nasdaq: INSU  ) . Unfortunately, you'd be wrong. The shares plunged more than 10% today.

So what: For this, you can blame the analysts at Oppenheimer. Calling the firm's full-year earnings guidance "highly aggressive" (and by implication, unlikely to be met), Oppy downgraded Insituform shares from "perform" to "underperform" this morning.

Now what: Aggressive the guidance may be, but Insituform's share price looks downright beat down at just 12 times earnings (and 13% long-term growth projections). Indeed, even if Oppenheimer is right about Insituform being too optimistic about its chances of earning $1.30 to $1.40 this year, the $1 this analyst does think Insituform will earn seems plenty to justify the company's current $14 stock price.

Granted, I do have concerns about Insituform's failure to generate free cash flow at levels equaling or exceeding reported income. But if you're basing your buy/sell decision on reported GAAP earnings alone, as Oppenheimer seems to be doing, I simply don't see a reason to sell based on that number alone.

Want to find out more about Insituform? Add it to your watchlist.

Fool contributor Rich Smith does not own (or short) shares of any company named above. The Motley Fool has a disclosure policy. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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