As Alice might say, this story is getting curiouser and curiouser.

Two days ago, in our Foolish Forecast previewing the second-quarter 2008 earnings report from (NYSE:CRM), I described the spate of ship-jumping going on at the firm: Nuance Communications (NASDAQ:NUAN) vet William Dewes vacated the post of principal accounting officer, and insiders are selling in droves. Meanwhile, said ship appeared to be turning the corner on both GAAP profitability and actual, honest-to-goodness cash profitability. Observing that while not exactly a bargain, the stock didn't seem all that unreasonably priced given its rapid rise in free cash flow, I promised to check back in post-earnings and tell you if I could find a reason for all the in-house jitters at Well, I think I've found it.

Good news
But I must say, with all the good news in the report, finding the bad was a bit of a trick. So let's look at the broad silver lining before we check for clouds:

  • 49% sales growth, a quintupling of net earnings, and $0.03 per share in profit.
  • Full-year guidance being raised to about $730 million in revenue, and about $0.09 per share.
  • A net increase of 10,500 paying customers versus this time last year, with subscribers passing the 800,000 mark. (Note that, generally speaking, a "customer" is a company and a "subscriber" is one of the employees of the customer authorized to use's software.)

Now presumably, not all of those 10,500 new customers are as large as existing blue-chip customers such as ABN AMRO (NYSE:ABN), Dow Jones (NYSE:DJ), Sprint Nextel (NYSE:S), ADP (NYSE:ADP), or Cisco (NASDAQ:CSCO). Still, even the raw numbers impress.

Bad news
The bad news? As quickly as net earnings grew, neither operating nor free cash flow growth were able to keep pace. The former grew just 15%, and with capital expenditures more than tripling year over year, free cash flow actually declined 10%. Granted, at $45.4 million year to date, free cash flow still dwarfs the firm's reported earnings by a factor of 10. Also granted, the first half of the year's 23% growth (compared with the same year-ago period) is naught to sneeze at.

However, if we're now looking at a stock priced at 51 times free cash flow, but growing those cash profits at only 23% per year -- and not the 36% I posited on Tuesday -- then appears less attractively priced than it did just two days ago.

Is it time to grab by the horns, or is this stock ripe for bear-baiting? Watch two of our top Fools duke it out in:

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool's disclosure policy is available on demand.