Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, business research provider The Advisory Board Company (Nasdaq: ABCO ) has received the dreaded one-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
|Headquarters (Founded)||Washington, D.C. (1979)|
|Market Cap||$1.2 billion|
|Trailing-12-Month Revenue||$327.0 million|
|Management||CEO Robert Musslewhite (since 2008)
CFO Michael Kirshbaum (since 2006)
|Return on Equity (Average, Past 3 Years)||13.1%|
|Cash/Debt||$39.1 million / $0|
|Competitors||Accenture (NYSE: ACN )
Cerner (Nasdaq: CERN )
McKesson (NYSE: MCK )
Sources: S&P Capital IQ and Motley Fool CAPS.
On CAPS, 44% of the 63 members who have rated Advisory Board believe the stock will underperform the S&P 500 going forward. These bears include All-Stars BuffettJunior1 and TSIF, both of whom are ranked in the top 10% of our community.
Just last month, BuffettJunior1 touched on Advisory Board's seemingly unsustainable valuation: "Unless this company can grow at over 50% per year over the next 10 years, I don't think its worth over a billion dollars, as its market cap suggests."
In fact, Advisory Board sports a particularly lofty P/E of 65. That represents a clear premium to competitors like Accenture (17), Cerner (38), and McKesson (18).
While Advisory Board's stock price has remained resilient, CAPS All-Star TSIF says he's cautiously sticking to the underperform call:
My theory was that with the high valuation that it would certainly disappoint at some point. The health care industry has been taking hits as the government clamps down. A company that specializes in advice would seem to be a luxury that it's customers couldn't afford, but the crunch apparently gives The Advisory Board Company a much needed value add. ...
Growth does appear to be slowing. ... Margins are not supporting growth.
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