Spring is in the air, and it's time for a pop baseball quiz: How many facets will you find on a standard-issue baseball diamond? Hint: It's twice the number of quarterly earnings reports yet published by nutty Nasdaq newcomer Diamond Foods (NASDAQ:DMND). Another hint: By this time Friday, Diamond Foods will narrow the gap to one (Diamond reports its fiscal Q2 2006 numbers tomorrow after market-close).

Wall Street Wisdom:

  • General consensus. Only three analysts follow Diamond. Only one of them likes the company enough to rate it a buy. The other two say to hold.
  • Revenues. America's going nuts for nuts. Diamond's quarterly sales are expected to rise 18% year over year, to $132 million.
  • Earnings. According to earnings.com, Diamond booked an $0.18-per-share loss in the year-ago quarter. Tomorrow, analysts are looking for $0.22 per share in profits.

Margin watch:
There's a serious dearth of information on Diamond among my usual financial data providers, and what data there is looks pretty unreliable. Capital IQ, for example, gives us just two quarters' worth of margin history. Judge for yourself how heavily you want to salt it:

Margins %

10/04

10/05

Gross

121.1

12.8

Op.

110.9

3.9

Net

110.7

2.3

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects performance for the quarters ending in the named months.

Foolish forensics:
The fact that even a fine outfit such as Capital IQ would find its computer algorithms befuddled over Diamond's numbers isn't surprising. In previewing the company's IPO back in March, I noted that if you took the numbers from Diamond's filings at face value, the issue seemed to be priced at a P/E of 1.1. Cracking open Diamond's S-1, I pointed out that the company was really priced at close to 30 times earnings, once you subtracted the costs of the nuts sold from the company's "profits." I concluded that Diamond probably wasn't worth buying at the asking price.

Today, my opinion remains unchanged. The company's trailing P/E has turned negative, and even with $5.9 million in trailing free cash flow, the company's resulting valuation at 51.5 times FCF means you'd have to be (let me wear this pun to a nub) nuts to buy this one.

Fool contributor Rich Smith does not own shares of Diamond Foods.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.