Why NetSuite's Shares Jumped

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 technology company NetSuite (NYSE: N  ) rose 18% on Friday after the company released earnings.

So what: In the second quarter, revenue rose 29% to $74.7 million, and earnings per share tripled to $0.06. Analysts had expected revenue to be $73.4 million and earnings per share of $0.04.

Now what: The company's software-as-a-service model is picking up steam, and the strong revenue growth is impressive in the current environment. My only problem is the incredible price that investors have to pay for the stock right now. The company's market cap is now more than $4 billion, and with analysts estimating that 2012 earnings per share will be $0.21, the stock trades at an incredible 277 times 2012 earnings. That's just too much for this Fool to pay, so I'll sell this pop today.

Interested in more info on NetSuite? Add it to your watchlist by clicking here.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

Motley Fool newsletter services have recommended buying shares of NetSuite. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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