In One Up on Wall Street, Peter Lynch suggests that you take a look at companies you encounter every day. Since part of my daily routine involves trying not to get squashed by traffic while riding my bike, I'm pretty familiar with the nation's largest bus services company, Laidlaw International (NYSE:LI).

Laidlaw, for those of you who are wondering, runs thousands of those shiny yellow buses that take kids to school. It's also the parent company of Greyhound, and it runs a large ambulance division. The company only relocated to the New York Stock Exchange in February, half a year after the firm emerged from bankruptcy back in June of 2003. (The company got a little hungry for acquisitions in the late '90s, and like many other firms, woke up with a big fiscal hangover a few years later.)

The stock took a 5% dive this morning on the heels of last night's earnings release for the second quarter of fiscal 2004. Earnings were $0.01 per share, up 5% from a year ago. Earnings before interest, taxes, depreciation, and amortization (EBITDA) met management guidance. Analysts, though, were much more optimistic, hoping for $0.12 a share.

Big interest payments are getting the credit for foiling the Street's number jockeys. Interest payments alone sucked up $34 million for the quarter. (The firm carries $1.2 billion in debt versus $93 million in cash.)

Things are tough, but they're not impossible. After all, net cash from operations for the quarter of $146 million was enough to cover interest as well as capital expenditures of $66 million. (Nobody said buses were cheap.)

Revenues rose 4% to $1.2 billion, also meeting management's goals. There was other good news, too. Greyhound, the firm's second-largest revenue stream, carries a much slimmer margin than school busing, so it's to the parent company's credit that it recently signed a new contract with the drivers, freeing the firm to concentrate on other ways to boost revenues and profits.

With a fresh start, Laidlaw was clearly a good turnaround play a few months ago when it traded at $8 a share. (Hindsight's 20-20, of course.) But it's less clear today. With the $14 shares valued at 21 times this year's earnings estimates, and considering how far from reality this quarter's estimates turned out to be, Laidlaw is no longer a no-brainer.

Tom Gardner digs deep to find small, undervalued companies for Motley Fool Hidden Gems . You can take a free, 30-day trial to learn more.

Fool contributor Seth Jayson grew up just miles from Greyhound's birthplace in Hibbing, Minnesota. He has no stake in any company mentioned above. View his Fool profile here.