"InPlay: Fundtech misses by $0.01, reports revs in-line; guides Q4 EPS below consensus, revs below consensus; guides FY08 EPS below consensus, revs below consensus"

As you've probably gathered by now -- if not from the above headline, then certainly from the stock's 14% plunge -- Motley Fool Global Gains recommendation Fundtech (NASDAQ:FNDT) reported its Q3 earnings yesterday, and the news was not good. Although the banking software provider and payments facilitator managed to grow its revenue 18% (no mean feat in the midst of a global recession), its profits fell 31% year over year, to $0.09 per share.

But next quarter will be better, right? Right?
Wrong. As bad as the above news sounds, worse still remains. As CEO Reuven Ben Menachem confided: "We are expecting some delays in the fourth quarter in closing new bookings with several global bank customers." Ben Menachem didn't name names, of course, but we've been hearing about delays with a Barclays (NYSE:BCS) contract for some time now. As for the other tardy contract signers, Fundtech's client list spans the globe, with names both familiar -- Bank of America (NYSE:BAC), Deutsche Bank (NYSE:DB), and HSBC (NYSE:HBC) -- and downright exotic, including Banco Popular Espanol and Umpqua (NASDAQ:UMPQ).

Whoever conveniently "lost their pen," though, one thing is certain: "A decline in revenues from our existing global bank customers" is coming in Q4. In light of this, Fundtech walked back its guidance for said quarter. It now predicts it will book only about $30 million in revenue, and lose about a nickel a share, in Q4.

Despite all this miserable news, Fundtech announced a $10 million share-buyback program yesterday. Is this mere window dressing for the bank lobby, or does Fundtech truly see value in its shares at today's price?

Hold onto your wallet
I suspect it's the former. Consider: So far this year, Fundtech has generated $2.9 million in free cash flow. That's not only about 20% less than what the firm reported as net income under GAAP, but also a drop of more than half from Fundtech's cash profitability of yesteryear.

At this rate, Fundtech will be lucky to generate even $3.9 million in free cash flow this year. Even then, the stock would be trading for 35 times its current cash profitability. At this price, I see no margin of safety whatsoever in this expected 21% long-term grower.

If Fundtech wants to buy its shares back, I'd be first in line to hand 'em over. 

Some of us saw this bad news coming:

Fool contributor Rich Smith does not own shares of any company named above. Fundtech is a Motley Fool Global Gains recommendation and The Motley Fool owns shares of Fundtech. (Needless to say, Rich rather doubts the Global Gains team agrees with him on this one.)

In furtherance of The Motley Fool's ironclad disclosure policy, let us also mention that Bank of America is a Motley Fool Income Investor recommendation, while Umpqua Holdings is a Motley Fool Stock Advisor selection.