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: Shares of NeuStar (NYSE:NSR) have settled on gains of roughly 8% this afternoon after peaking at 10% above yesterday's closing price. Investor optimism around the stock appears to be a mix of rejoicing over NeuStar's earnings beat last evening and anticipating the fruits of the company's upgraded full-year earnings guidance.
So what: NeuStar's second-quarter earnings report provided just enough outperformance to excite investors who've been cautious around government-focused businesses. The company's revenue came in at $220.4 million (a 7% year-over-year improvement), ahead of the Street's $219.4 million consensus, and adjusted earnings of $0.85 per share were $0.05 better than the $0.80 analyst consensus.
Looking ahead, NeuStar still expects $895 million to $915 million in revenue for the full fiscal year, about even with the $904.4 million consensus. However, the company's boosted its EPS guidance range to somewhere in the neighborhood of $3.38 to $3.53. Analysts were modeling $3.38 in EPS for 2013, so yesterday's upgrade was a welcome sight.
Now what: NeuStar shares have already gained 60% over the past year, but the stock's two-year average P/E of 17.8, according to Wolfram Alpha, is now 27% below its currently reported P/E of 24.4. There might be plenty of potential left, but the further away this stock gets from its historical averages, the harder it becomes to call it a great buy. Tread cautiously and do your homework here.
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Fool contributor Alex Planes has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. 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.