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 business commerce solutions provider Ariba
So what: Revenue rose 21% in the first quarter to $131.5 million, driven by a 59% increase in its network business. Net income rose from breakeven a year ago to $2.3 million, or $0.02 per share. Adjusted earnings per share were $0.25, $0.03 ahead of estimates.
Now what: Stock-based compensation accounted for most of the adjustment, so I think the adjusted earnings number is overstated. Even with the adjusted earnings number, the stock is trading at 35 times 2013 earnings, a steep price in my eyes. I'm going to stay away from this stock partly because of the high price and partly because management is giving away nearly all of its profits in the form of stock to employees.
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