Analysts Views Mixed on The Advisory Board Company (ABCO)

Several analysts have recently weighed in on The Advisory Board Company (NASDAQ:ABCO), issuing notes to investors. Matthew Gillmor of Robert W. Baird & Co has Neutral stance on the stock on August 5, 2015 with a $49.67 price target to the last closing price with a $2,190 market cap.

“Revenues of $191M (+35% y/y) came in slightly below Street estimates of $194M, but EPS of $0.40 (+35% y/y) was 25% above Consensus at $0.32. The revenue shortfall was primarily attributable to slower Royall growth, partially offset by stronger standalone ABCO results. EBITDA margins were meaningfully above our estimates (scale gains) and drove the EPS upside. Royall performance issues. Royall revenues grew in the mid single digits during 1H (vs 15-18% expectation) due to several issues: (1) the CEO and CFO departed earlier than anticipated; (2) integration distractions during the busy Jan-June selling season; and (3) timing of revenue recognition. ”

Sean W. Wieland of Piper Jaffray & Co also released a note to investors August 5 reiterating the firms Hold stance on Advisory Board.

“Contract value of $742M beat our estimate of $737M. Revenues of $185M beat our estimates of $182M but were below consensus of $195M. EPS of $0.40 beat our estimates of $0.36 and consensus of $0.33. The company lowered guidance for FY2015 with revenue now expected in the range of $780-790M (previously $780-800M) and non-GAAP EPS expected in the range of $1.30-$1.37 (previously $1.30-$1.43). The company’s 3Q15 outlook is for revenues of $187-191M; Adj EBITDA of $27-$29M, and non-GAAP EPS of $0.12-$0.15. ”

Wieland also added, “Royal missed targets due to executive departures. ABCO lowered guidance due to the fact that Royal contributed ~$6M less in the quarter than planned. The CEO and CFO of Royal left unexpectedly halfway through the quarter, which affected deal closings. To remedy the situation, management has put 15 of the top operators of Royal on an EBITDA-based equity incentive plan to improve retention, and has begun integrating the business more tightly into its control.”

Another analyst at Canaccord Genuity Inc has a Bullish stance on the stock. Brian Hoffman issued a note on 5 August with a Buy rating on the stock and $65.00 price target.

“Our price target of $65 is based on a 3.7x multiple of 2016E EV/sales, a 10% discount to the a health technology peer group. Considering ABCO’s significant recurring revenue base (~85% revenue visibility), strong retention rates, and SaaS offerings we believe multiple expansion from current levels is justified. Further, the company’s strong population health research, technology, consulting offerings and Evolent Health investment don’t appear to be fully baked into the current valuation.”

The Advisory Board Company (NASDAQ:ABCO) is the leading provider of insight-driven technology, research, and services for organizations in transforming industries. Through its innovative membership model, the Company collaborates with more than 230,000 leaders at 5,200 member organizations to elevate performance and solve their most pressing problems. The Company provides strategic guidance, actionable insights, cloud-based software solutions, and comprehensive implementation and management services.

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