Why Shares of Angie's List Soared Today

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Source: Wikimedia Commons

What: Shares of online marketplace Angie's List soared by as much as 56% on Wednesday after the company reported stellar fourth-quarter results and issued full-year guidance that significantly exceeded Wall Street's expectations.

So what: It's always nice to achieve a first. "For the first year in company history, [we] generated positive adjusted EBITDA," announced Angie's List CEO Bill Oesterle in the press release announcing fourth-quarter and full-year 2014 results for the online marketplace EBITDA, or earnings before interest, taxes, depreciation and amortization, is a measure of cash flow.

The key to the company's fourth-quarter "beat" on earnings per share was a 53% drop in marketing expense (that line was roughly flat for the full year relative to 2013). Lower marketing expense is very probably instrumental in explaining company guidance on EBITDA for this year that is well ahead of what analysts were forecasting indeed, guidance on revenues was in line with the consensus estimate:

Source: Thomson Financial Network, Angie's List

Now what: Today's share price "pop" helps to recoup some of the losses Angie's List's long-term shareholders have sustained. Prior to today, the stock was down more than two-thirds from its closing price on its first day of trading in November 2011 ($16.26). Uncertainty remains, but Angie's List could be on the verge of sustained profitability. If that's the case, the bottom may well be in with regard to the stock price. Fundamental investors will need to keep a close eye on results over the next several quarters for confirmation of this quarter's performance.

The article Why Shares of Angie's List Soared Today originally appeared on Fool.com.

Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.