Whether a company misses by a penny or beats by a penny -- or even a nickel -- in the long term, what's the big difference really? In my mind, there really isn't any. Sure, it may be a little disappointing at the time, but whether a company misses or makes earnings for any given quarter or even year is not a good yardstick for what it is worth.

So as I look at yesterday's earnings release from payroll and time-keeping software firm Kronos (NASDAQ:KRON), I'm intrigued by the initial reaction of investors in after-hours trading, where the stock is down almost 15%. I'll grant you that missing by $0.03 is a rather large disappointment, but if you put it in context, the company still grew earnings by 13% against the same period last year. To round out the bad news, management announced that earnings for fiscal 2005 will only grow to $1.56-$1.64 for the year, or about 8%-13%. Needless to say, investors were expecting more.

If you want to scream that expectations were for growth of greater than 20% and that the stock carried a forward P/E of 24 to match that expected growth, I won't argue, because you're reading the numbers correctly. However, I am going to suggest that you may not be using the right numbers. For all companies, enterprise value-to-free cash flow (EV/FCF) is a better measurement of value, and for a company like Kronos with a large net cash position, it can make a rather large difference.

With the 15% shellacking and management's updated guidance, I estimate that Kronos is now trading at an EV/FCF of about 17. Kronos didn't provide a statement of cash flows, but based on the balance sheet and income statement, I'm making some very rough estimates. Estimating forward to the end of the year and using management's guidance for growth of 8%-13%, I get an estimated 2005 EV/FCF of about 14. It could be a little higher or lower depending on how much free cash flow actually does grow and what the company's cash position looks like at the end of its fiscal year.

It makes sense to wait for the company's full report in its 10-Q, which should be out in the next couple of weeks. In the interim, taking a deeper look at Kronos, as well as what competition Ceridian (NYSE:CEN) and Oracle (NASDAQ:ORCL) have to offer, is a good plan, because it's not every day that a company with a strong balance sheet and history of growth gets this cheap.

For more on Kronos, see: "Kronos Clocking Gains."

Fool contributor Nathan Parmelee has no financial interest in any of the companies mentioned.