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Online Resources Corp. Message Board

  • topline1@sbcglobal.net topline1 Oct 26, 2007 9:50 AM Flag

    -26% time to buy

    Way over done here. Remember this compnay will grow in excess of 20% next year. And has prospects to continue to grow well beyond 08. Should be double the size it is now wihtin 5 years. Take advantage of this buying opportunity while you can.

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    • topline1@sbcglobal.net topline1 Oct 26, 2007 1:50 PM Flag

      Here is the response from investor relations.

      Our Corporate Communications department forwarded me your question (below) for response. We did reduce the low end of our 2007 full year guidance range as a part of yesterday�s earnings, by about $700,000 in revenue and $0.03 in core earnings. This represents less than 1% of revenue and 10% of earnings. Further, though we have not yet given 2008 guidance, equity analysts� have published their own expectations for the year. We felt those were somewhat too aggressive and gave some preliminary direction for 2008 expectations. The midpoint of the direction ranges we gave are about 5% below analyst consensus revenue and 25% below consensus earnings. We explained that our thoughts considered the slightly lowered 2007 expectations, a bit more conservatism surrounding our emerging expedited payments business and a shift in business mix to larger clients with lower (because of their high volumes) pricing. We indicated that that these broad ranges were preliminary and we would give full guidance in early December,

      Of the large client losses we discussed yesterday, only one � Jack Henry � had not been previously discussed with the investment community. We were only notified of their departure in the third quarter, though we had identified them as a risk for 2008, and only solidified the earlier timing very recently. This call was the first opportunity we had to discuss their departure.

    • I take no pleasure in saying this, but I wrote that this company seemed way over valued on September 28th and that was if they could hit the high estimates they had guided the analysts to make. Now two things have happened, the company is guiding to a lower number and the stock price has been hammered. I still think this stock is over valued. When looking at their growth estimates, you must analyze the growth from acquisitions vs. organic growth. They pay a hefty price for the acquisition growth (one could argue a higher price than the underlying cash stream they are acquiring is worth) so I am not sure that you can reward them for that. Their organic growth, as highlighted by several analysts on the call, is in the low teens (at best).

      Before people start blasting me, take a look at the cold hard numbers. As I mentioned in September, generating a high amount of cash flow for common shareholders (the key factor in a higher stock price) will be difficult even if ORCC is able to generate high revenue and good margins. Between preferred dividends and onerus conversions, their capital structure results in a lot of mouths to feed.

      I am perplexed by the praise for management being transparent. I am not sure how guiding people to unrealistic forecasts and then waiting until they absolutely must provide some guidance for 2008 to scale back their guidance is worthy of praise. The tone of the questions from the sell-side analysts on the call should give you an indication of how they felt about management's transparency. Management losing credibility with Wall Street is a terrible thing for a stock. This stock in particular seems to have a group of analysts that have largely ignored a management team that tries to sugar coat their financial results by excluding just about everything from their "underlying" or "core" net income (see my previous posts), but one thing that analysts will not forgive is being misled.

      Take a look at ORCC's true earnings. How they continue to report earnings without a true tax rate is amazing and KPMG should be careful that they are not getting hoodwinked on this. Management tries to show an EPS with earnings included from an acquisition, but without the true impact of the cost of the acquisition. To hear their CEO make comments like "the Princeton deal would be accretive if you exclude the cost of the deal" are amazing. As I have said previously, I think people see what they want to see. I think investors and analysts are waking up to the fact that this company has been teetering on the edge for quite some time and is no going over.

 

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