Navigant: Finding Its Way? (News) November 5, 1999

Navigant: Finding Its Way?

By Dave Marino-Nachison (TMF Braden)
November 5, 1999

Following the daily twists and turns of virtually any stock is a pretty pointless endeavor for a Foolish investor, but in the case of management consulting company Navigant (NYSE: NCI) the shares' movements over the last several weeks have been painted in strokes that make for a pretty fascinating story.

Today, Navigant's shares rebounded slightly from yesterday's sharp fall of nearly 40% as the company attempted to recapture some of the credibility many on Wall Street and elsewhere feel has been squandered.

It's been one thing after another at Navigant of late. (Here's a chart to set the stage.)

The shares started their nosedive in the middle of last month when the company disappointed some speculative investors by saying it wasn't going to go ahead with the merger opportunities that were on the table, citing "our unique franchise, strong profitability and prospects for the future" as reasons to stay independent.

A late October story in Barron's made matters worse: Writer Barry Henderson said some believe Navigant's revenue growth has been misinterpreted by many investors because it counts incremental revenue from "immaterial acquisitions," which don't require a restatement of financial results. The article also questioned the company's ability to hang on to key personnel brought on through acquisitions.

Yesterday's collapse came after the company disclosed during its earnings conference call that it loaned CEO Robert Maher about $10 million for a personal real estate transaction -- although a company spokesman told Bloomberg that Maher took the loan because he couldn't sell company stock at the time with Navigant in merger talks. Also at issue may be the price Navigant paid for Baltimore-based PENTA Advisory Services, a financial and economic consulting company bought last month.

Today's move is probably related to the company's official response to yesterday's carnage: Navigant said it was "unaware of any undisclosed corporate activities or developments" behind the stock's fall and instead blamed an analysts' downgrade -- reportedly that of Merrill Lynch's Thatcher Thompson, who suggested that Navigant should cool it with the acquisitions and buy back stock instead -- that stemmed from the aforementioned call.

Perhaps not coincidentally, Navigant also said it yesterday bought back "a substantial amount" of its shares on the open market "based upon yesterday's market activity and its confidence in the future," and suggested that more buybacks could be forthcoming.

And Navigant today insisted that it is "comfortable" with analysts' expectations for "the future": At least one brokerage got behind the company today when Robertson Stephens' Steven Birer said Navigant "is suffering from a deluge of negative incidents, some self-inflicted, which are all peripheral to the company's business opportunity" and won't have a long-term effect on the stock.

But Navigant stock still has a lot of ground to make up following the abrupt fall of the last several weeks. By giving itself a benchmark of sorts in the form of forward earnings guidance, the company has established a first step for regaining the investor confidence that's been lost.

Related Links:
Navigant Web Site
Navigant Message Board

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