You can please some of the people some of the time, but Blackboard (NASDAQ:BBBB) investors? Seems you can't please them any of the time.

As you may recall, Blackboard got floored last quarter despite reversing the previous year's second-quarter loss with a $0.12-per-share profit (and not the wimpy pro forma kind, either) on revenue growth of 36%. Its transgression: issuing disappointing short-term guidance even as it raised guidance for the year.

Second verse, same as the first
Well, Blackboard's at it again, and so are its investors. Last night, the company reported sales that exceeded expectations ($61.6 million in all) and profits that met them ($0.11 per share, by GAAP standards). Meanwhile, the company raised its annual guidance yet again -- this time to $0.42 to $0.44 per share in profit on $237.3 to $238.3 million in revenues. (Considering that the year has only part of a quarter left in it, though, you might prefer to focus on the fourth-quarter guidance: $0.13 to $0.15 per share on $61 million to $62 million in sales.) Seems that wasn't enough for investors, though, since it sparked a quick downgrade from stock picker R.W. Baird and a 9% sell-off from Mr. Market.

What's important
Listen, I'm as generally accepting as the next guy about GAAP accounting standards, but all this talk of earnings under GAAP and expectations gaps is starting to wear a little thin. The fact that analysts insist on judging the company not by its now-once-again-profitable GAAP numbers, but also by their pro forma variant instead, also nags at me.

So bear with me for a moment as I value Blackboard instead on its free cash flow. So far this year, company has generated $39.8 million in operating cash flow and spent $11.2 million of that on capital expenses. With management guiding to "approximately $60 million" in operating cash flow by year end, and assuming that capital expenditures grow at approximately their run rate year-to-date, we're looking at an outfit that will probably end the year with roughly $45 million in free cash flow.

Divide Blackboard's now-slashed market cap by that figure, and Blackboard is trading for 28 times current free cash flow. Granted, that looks a bit steep if Blackboard achieves only the 25% annual profits growth that analysts are now projecting for it. But remember, this little company operates as a virtual monopolist on the educational-software market. How often have we seen similarly dominant companies, such as Google (NASDAQ:GOOG), Starbucks (NASDAQ:SBUX), and eBay (NASDAQ:EBAY), or Nuance (NASDAQ:NUAN), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT), astound the analysts by growing much longer and much faster than they were supposed to?

I think Blackboard's competitive position makes it worth a bit of a premium. Maybe a whole lot more than a bit. If Mr. Market insists on continuing to offer this company at a bargain price for the 10 days that I must wait to buy after writing about it -- as mandated by The Motley Fool's disclosure policy -- I'm going to be sorely tempted to put my money where my keyboard is and become a Blackboard shareholder myself.

For a bit more than two years in the Motley Fool Hidden Gems portfolio, Blackboard has rewarded investors who heeded our advice to buy it with more than 120% in profits. Will it do so again? Will another stock in the portfolio do better -- as many already have, Nuance among them? Take a free trial, and join us as we find out together.

Starbucks and eBay are Motley Fool Stock Advisor picks. Microsoft is a Motley Fool Inside Value recommendation.

Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.