Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: K12, Inc.
So what: Reported EPS of $0.23 fell 28% year-over-year and fell short of the $0.26 consensus estimate as spending increased on product and service launches and acquisition integration. Nonetheless, management guided revenue for the fiscal year to $515 to $520 million, compared to previous guidance that it would "exceed" $500 million. Wall Street's consensus forecast was $504.2 million. Operating income guidance was increased from "over" $28 million to "in excess of" $31 million.
Now what: The company also provided its first guidance on the tax rate and interest expense for the fiscal year, which should support greater confidence in EPS estimates. That said, the stock is trading at a P/E ratio of 51.6 times trailing EPS and 38.8 times the consensus EPS for the next four quarters (which is likely to rise somewhat). It isn't obvious what could drive the amount of EPS growth needed to justify the valuation, particularly in light of the large EPS drop the company just reported.
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Fool contributor Cindy Johnson does not own shares of any company named above. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.