Ever love a stock? Philip Durell, known to friends as the Admiral, and the brains behind the Motley Fool Inside Value newsletter, confessed his love for travel and real estate company Cendant (NYSE:CD) twice in February -- once for Valentine's Day, and once as a recommendation for his newsletter readers.

The Admiral has to be pleased by today's earnings report. Although Cendant's earnings tumbled, held down by $374 million in various charges, the company stated its case this way: "Our first quarter results reflect the strength and improving fundamentals of our businesses, and our Board and management believe that our equity is being significantly undervalued by the market. Accordingly, we have doubled our planned minimum funding for share repurchases in 2005 to $1.0 billion."

Skeptics will howl that, at current prices, the buyback will return only 4.8% of the company's shares to its coffers. But let's use the Admiral's math from his February recommendation. Using a five-year earnings growth rate of 10% (below the 13% to 15% analysts are estimating), the estimated intrinsic value is $31 a share -- for a stock currently trading at $20.10 a share. Hey, that certainly rings "Buy" for this observer.

Cendant continues to estimate that it will produce nearly $2 billion in free cash flow this year, and with a net debt (total debt minus cash) of $4.9 billion, Cendant is conservatively leveraged at 32% long-term debt to equity.

The company used today's press release to raise the low end of full-year earnings guidance by a penny. The company expects to earn between $1.35 and $1.42 a share before charges ($1.15 to $1.22 after charges) in 2005 and between $1.62 and $1.72 in 2006. That works out to a below-market earnings multiple of about 12 times the low end of 2006 guidance -- and it's another way to help observers see why Cendant is buying its own stock.

Though the company's earnings guidance, with expected full-year charges netted out, falls within the $1.40 projected by analysts for the current year, analysts were disappointed because they were expecting the company to earn $0.24 a share before charges instead of $0.06 a share (net of charges).

Investors would be wise to re-read the Admiral's Valentine's Day evaluation and consider the strong brands Cendant owns, not to mention its ability to gush free cash flow. Then try a free subscription to the Inside Value newsletter -- and use the Discounted Cash Flow Calculator provided there to compute the intrinsic value of your stocks (and the Admiral's, too).

Fool contributor W.D. Crotty does not own Cendant stock. Click here to see The Motley Fool's disclosure policy.