Online business veteran Yahoo! (NASDAQ:YHOO) is due for a second-quarter earnings report this evening, and a lot of water has flowed under the bridge since the last go-round. How is the company really doing amid a love-hate courtship dance, proxy battles launched and withdrawn, and the fallout from all of the above?

What Fools say:
Here's how Yahoo!'s CAPS rating stacks up against some of its peers and competitors:

Company

Market Cap (billions)

Trailing P/E Ratio

CAPS Rating (out of 5)

Microsoft (NASDAQ:MSFT)

$234.6

14.9

***

Google (NASDAQ:GOOG)

$147.2

32.4

***

Time Warner (NYSE:TWX)

$51.4

14.6

***

eBay (NASDAQ:EBAY)

$31.7

76.3

***

Yahoo!

$29.9

28.2

**

Data taken from Motley Fool CAPS on July 21, 2008.

Fellow Fool and CAPS All-Star Seth Jayson doesn't like the current management team here: "The boneheads running Yahoo! are looking to keep their jobs rather than do what's right for shareholders. They'll continue to screw up royal, and shareholders will eventually end up having to take a much cheaper buyout offer down the road." (Seth does not mince words.)

The bulls disagree with his premise that a future buyout would be a bad deal. Some of them also point out that Carl Icahn has a knack for squeezing value out of his investments. Surely he can find a way to do the same for this billion-dollar holding?

What management does:
Yahoo!'s growth engines have generally been stalling out lately, and profit margins are dwindling as well. The one bright spot in this doom and gloom happens to be a powerful one, though: The cash flow takeaway is not only growing, but also accelerating.

Margin

12/2006

3/2007

6/2007

9/2007

12/2007

3/2008

Gross

58.4%

58.2%

60.1%

60.3%

59.3%

59.5%

Operating

14.6%

13.9%

13%

12%

10.2%

9.7%

Net

11.7%

11.2%

11%

10.6%

9.5%

14.9%

FCF/Revenue

10.6%

11.6%

11.5%

13.5%

18.9%

23.1%

Growth (YOY)

12/2006

3/2007

6/2007

9/2007

12/2007

3/2008

Revenue

22.2%

15.6%

11.4%

9.9%

8.5%

9%

Earnings

(60.4%)

(60.4%)

(42.1%)

(38%)

(12.2%)

44.4%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Icahn wouldn't do battle over Yahoo! if he didn't believe in the company to some degree. He's also much more likely to base his business decisions on solid research than on gut instinct, and that cash flow trend may have been a factor in his request for a few board seats.

Now, Microsoft's online division did not post impressive results this quarter (or any quarter, for that matter), and even mighty Google fell short of expectations. Those are dark omens amassing in Yahoo!'s sector, and you should brace yourself for another disappointment here.

For the long term, I agree with Seth that this spring was a disaster for Yahoo!, but I disagree with his analysis of its chances to land a healthy buyout price. With Icahn in the proverbial henhouse, a sale looks certain, and like I said, the guy knows what he's doing. The $33 per share that Yang seeks would represent a 53% premium to last night's closing price, and even a paltry $26 bid is an instant 20% win for current shareholders. Now let's see whether Yahoo! can show Redmond some good, hard numbers and inspire a better bid.

Microsoft is a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers selection. Time Warner and eBay are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletter services free for 30 days.Or just sign up for a free CAPS account to read more insights from the fellow Fools who were quoted above -- and share your own thoughts!

Fool contributor Anders Bylund owns a few Google shares, but he holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is the Punxsutawney Phil of financial forecasting.