Correct me if I'm wrong. Recessions are supposed to be
badfor business, right?
Well, apparently not. Or at least, not if you're
Blackboard (Nasdaq: BBBB). The educational
software provider and
Google (Nasdaq: GOOG) partner defied the
downturn in tax revenues, the soaring costs of
public education, and the general anemic economics of
this
jobless recovery, turning in a real eraser-clapper of a
quarter last night:
Combined with similarly strong cashflows earlier this
year, and admirable restraint on the capex front, this brings
Blackboard to a whopping $73.9 million in free cash flow
produced so far this year -- more than 120% more cash than
had poured through the doors by this time last year. If
Blackboard can maintain this pace, therefore, we could easily
be looking at $98.5 million in free cash flow by
year-end.
Not so fast, Tex
Or at least, that's what my calculator tells me as I
crunch Blackboard's run-rate. Management, in contrast, is not
quite so optimistic -- positing cashflow of only $95 million
to $105 million by year-end. Assuming that's all it manages
to do, and subtracting likely capital expenditures from this
range, we're more likely to see Blackboard generate free cash
flow in the neighborhood of $79 million. That's a tidy sum,
but still only a 16-times multiple to free cash flow (and for
a company growing revenue at 18% in the middle of a
recession). But not the absolute,
scream-your-head-off-and-run-around-the-classroom
bargainthat Blackboard's run-rate would suggest.
So ... is it a buy or not?
You already know my answer to that -- I
ownthe stock, for goodness sakes. And yes, I aim to
buy more based on these numbers ... and this news.
Already a popular company (it recently "friended"
Microsoft (Nasdaq: MSFT) via Facebook),
Blackboard is only getting more so. Its latest rundown of
"new and expanded client relationships" included a few names
you'd expect to see signing with an online education
specialist --
Grand Canyon Education (Nasdaq: LOPE) and
Capella Education (Nasdaq: CPLA) for example.
But some of the other relationships listed seemed more apt to
be on a client list for
General Dynamics (NYSE:GD) or
Lockheed Martin (NYSE:LMT). I'm talking the
CIA here, folks. The Defense Language Institute. The "Joint
Special Operations University."
Commandos with bookbags?
Yes, indeedy. Blackboard is making some unusual -- and
it seems, unusually profitable -- friends lately, Fools. My
advice:
Make sure you're one of them.
This article was originally published as
Blackboard Asks: "Recession? What Recession?"on
Fool.com
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