There are no safe havens in the stock market. Every stock carries risk. But some less than others. This column features stocks that have shown one or more of the following characteristics: less volatility, better earnings, larger market caps, safe and increasing dividends. In these times of turmoil, our goal is to show readers better opportunities for investing with fewer risks.

December 8, 2009 - Advisory Board Co. (ABCO-NASDAQ) provides best practices research, analysis, executive education and leadership development, business intelligence software tools, and installation support services primarily to the health care industry. Its programs focus on business strategy, operations, and general management issues.

Its best practices research services focus on identifying best-demonstrated management practices, critiquing widely-followed but ineffective practices, and analyzing emerging trends in the health care and education industries; business intelligence and analytics programs enable members to pair their own operational data with best practices insights; and installation support programs assist member institutions to adopt and implement best practices to enhance performance.

As of September 30, 2009, the company offered 43 programs to a membership of approximately 2,800 organizations, including hospitals, health systems, pharmaceutical and biotech companies, health care insurers, medical device companies, universities, and other education institutions. The Advisory Board Company was founded in 1979 and is headquartered in Washington, District of Columbia.

Up until January of 2008, this stock gradually and persistently went higher, starting in late 2001 when it went public at $19 a share, then reached a peak of $69.50 in December of 2007. It went downhill for the next year, finally reaching a bottom of $13.45 on March 9 of this year. It's rebounded to almost double that level, trading at $26.30 as this is written. Can it keep going, get back to its old high?

To counter these concerns: There's $94 million in cash in the bank and marketable securities which is about $6.00 a share. There is no debt so no interest payments are due. The company is buying back its own shares and capital expenditures are relatively minor. Acqusitions are also possible with this much cash. And finally, earnings are turning around noticably.

Not that earnings ever went negative. It's just that they dropped significantly from $1.72 to $1.30 from 2007 to 2008. This year, it looks like the trend will continue with 6 analysts having a consensus estimate of $.73, then rebounding next year to $1.36. Fiscal third quarter earnings will be out in January. Look for 30 cents a share vs 37 cents last year in the same period. Fiscal year ends in March. For the fourth quarter, analysts expect 31 cents a share, up from 25 cents in the fourth of this year. Look for the December quarter results in early February. This is when the company announces renewal and new sales for the next 12 months.

Lower earnings this year can be attributed to two large, non-cash, one time items. The first charge came from directors and senior managers voluntarily giving up about 830,000 stock options with strike prices between $51 and $61 a share. This charge simply accelerates the option expenses that would have been taken in 2010 and 2011 which means those charges are this year and not in the future. The total expense was $1.9 million. The second hit to earnings was $7.4 million for capitalized developed software costs, since it migrated users of its Nursing Performance Program to a more efficient Internent analytical tools program. Together the two expenses took 40 cents off total earnings.

Revenues are on the rise again. In the second quarter, contract value (the total annualized revenue from all agreements) was up 3%, a nice improvement from the zero growth of the previous two quarters. Sales are coming from products that are analytic tools, helping with margin improvement or tied to return on investments for clients.

More numbers: Trailing P/E is 35; Forward P/E is 19. Price to sales is 1.79. Price to book is 3.98. Book value is $6.68. Operating margin for the last 12 months was 9.9% while Profit margin was 5.12%. Return on equity was 11.54%. There are 15.53 million shares outstanding with a float of 15.12 million. Institutions own 97% of the stock. There is no dividend. Value Line gives the stock an A for Financial Strength.

This is an interesting, small stock that should generate looks from more conservative investors. Operating earnings remain strong even though the one-time charges hurt reported earnings. There's plenty of cash for a number of purposes, including starting a dividend. Check it out if a stock of this size isn't a concern.

- Company Web site: www.advisoryboardcompany.com

- Ted Allrich