Armed with solid fiscal first quarter earnings, a strong double-digit jump in contract value, a new program offering and estimated long-term earnings growth of 19.7%, Advisory Board Co. (ABCO) surely offers an attractive investment opportunity for growth-seeking investors.
This Zacks #1 Rank (Strong Buy) research, technology, and consulting service provider has delivered eight positive earnings surprises in the last 10 quarters with an average beat of almost 8%.
Strong Start to Fiscal 2013
On July 31, Advisory Board reported first quarter fiscal 2013 earnings of 25 cents per share, beating the Zacks Consensus Estimate by 8.7% and year-ago earnings by a significant 32%.
The top line grossed $104.1 million, improving 30.3% year over year. Contract Value totaled $411.6 million, increasing 25.8%.
Adjusted Earnings Before Interest, Tax, Depreciation and Amortization (:EBITDA) were $20.2 million, surging nearly 43% over the prior-year quarter.
Advisory Board launched Crimson Population Risk Management under its Crimson platform. The software tool will reportedly be offering the best-in-business population risk analytics, combining clinical and claims-based data.
Outlook for Calendar Year 2012
Advisory Board revised its expectation for calendar year 2012. It expects revenue between $426 million and $432 million, up from the previous band of $420 million to $430 million.
Adjusted EBITDA is projected at $79 million to $82 million, up from the previous range of $77 million to $82 million.
The company raised the upper end of the earnings by 5 cents. Adjusted earnings are now estimated between $1.20 and $1.25 per share, up from a range of $1.20 to $1.30 per share.
Positive Estimate Revisions
Earnings estimates were revised higher following the fiscal first quarter results. For fiscal 2013, the Zacks Consensus Estimate is currently $1.20, up nearly 25.0% in the last 30 days as three of six estimates were revised upward. This outlook also suggests a year-over-year increase of 29.7% (adjusted for 2:1 stock split effective June 18, 2012).
For fiscal 2014, the Zacks Consensus Estimate of $1.49 improved 20.2% over the last 30 days as four of seven estimates moved upward. The current estimate also represents a year-over-year increase of 24.2%.
Shares of Advisory Board are roughly trading at 35.4x the fiscal 2013 estimate, compared with the peer group average of 23.3x. On a price-to-book (P/B) basis, shares are trading at 6.2x, compared to the peer group average of 2.7x. The PEG ratio is 1.8 times.
Nonetheless, the company has a trailing 12-month ROE of 16.5%, higher than the peer group average of 13.6%.
Founded in 1979 and headquartered in Washington, DC, Advisory Board offers best practices research and analysis, software tools, and management and advisory services to hospitals, health systems, pharmaceutical and biotech companies, health care insurers, medical device companies, colleges, universities, and other educational institutions.
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