In a recent edition of Barron's, a hedge fund manager offered Bankrate (NASDAQ:RATE) as a good short sale candidate. So far, that's been a bad call. Yesterday, on news of the company's earnings, the stock surged 12.09% to $25.59, reaching a new 52-week high.

In the second quarter, revenues increased 22% to $12.4 million, a 19% increase from the first quarter. Year over year, net income was $2.5 million, or $0.15 per diluted share, which was up from $2.1 million, or $0.13 per diluted share.

As indicated in a piece I wrote a few months ago, Bankrate has undergone an "extreme makeover." Its new CEO, Tom Evans, has used his extensive knowledge of the media world to leverage Bankrate's strengths via a five-point plan.

First, Bankrate completely redesigned its website. Over the years, the site had become cluttered; now, it is much cleaner and more user-friendly. As a result, Bankrate.com is getting much more traction in terms of page views and click-throughs. For the second quarter, the site generated 114 million page views, up 23% from the same period a year ago. In fact, Bankrate only had to pay for 15% of its traffic -- the rest came from other sites who wanted to use Bankrate's compelling content.

Establishing co-brands was another of Evans' initiatives. In the second quarter, Bankrate signed deals with Autobytel (NASDAQ:ABTL), HomeGain, Internet Broadcasting, and Savingsforcollege.com, which direct traffic to the site.

Next, Bankrate restructured its approach to distributing mortgage leads, reducing the number of mortgage providers from seven to two. This has increased the revenue per lead, with Bankrate taking a higher cut per lead (and has also meant more business for the two mortgage providers). There are concerns about whether customers will achieve the best execution because of the dwindling number of partners, but the fact remains that the mortgage environment has become price-driven. If customers don't get the best prices from Bankrate, they'll take their business elsewhere.

Also, Bankrate restructured its sales force, making new hires and establishing offices in New York, Chicago, San Francisco, and Los Angeles.

Finally, Bankrate is changing the way it charges for click-throughs from its rate tables. Currently, the business model is based on a flat fee structure. But by October, Bankrate will charge on a pay-per-click model. After all, it's no secret that if you look on Google (NASDAQ:GOOG) or Yahoo! (NASDAQ:YHOO), you'll notice that mortgage-related search words sell at high rates. Bankrate's reliance on this method might prove problematic if and when the housing market cools, because it derives some proportion of its revenue from mortgages, but that doesn't appear to be happening too soon. On the conference call, Evans indicated that, in the last four months, he has never seen as much growth in the demand for online advertising. Financial institutions are realizing that direct mail and television advertising are becoming less meaningful.

There might be some concern about emerging competitors, because barriers to entry are relatively low. In my opinion, Bankrate holds two key differentiators, both difficult to replicate: It has a recognizable brand in the marketplace (over 30 years), and its rate tables are a standard in the industry for things such as mortgages and CDs. This is very appealing to other content sites.

So it's no surprise that Bankrate is upping its guidance. For 2005, the company expects revenues of $45 million to $45.8 million and earnings of $0.76 to $0.79 per diluted share. The previous guidance was for $42.3 million to $43.1 million in revenues and $0.69 to $0.71 per diluted share.

But in light of the surge in activity and industry demand, Bankrate's guidance may be overly conservative again. Despite the company's reliance on several macro factors (and some might disagree) I think this stock is a buy.

Fool contributor Tom Taulli does not own shares mentioned in this article.