Why Inovalon Stock Plummeted Today

By Timothy GreenMarketsFool.com

Image source: Inovalon.

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What: Shares of Inovalon (NASDAQ: INOV), a cloud-based analytics company focused on the healthcare industry, tumbled on Thursday following the release of the company's second-quarter report. Inovalon reported lower revenue than expected, and it cut its guidance for the full year. At 12:00 p.m. ET, the stock was down about 24%.

So what: Inovalon reported second-quarter revenue of $123.8 million, up 5% year over year but $3 million lower than the average analyst estimate. CFO Thomas Kloster explained why the company came up short:

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Non-GAAP EPS came in at $0.14, down from $0.18 during the prior-year period and in line with analyst expectations. EPS on a GAAP basis was $0.11, down from $0.17. Total costs soared 35% year over year, driving down profitability. CEO Keith Dunleavy pointed to a slower-than-expected payoff time for investments in sales capacity:

Now what: A weaker-than-expected second quarter led Inovalon to lower its outlook for the full year.

Data source: Inovalon Q2 earnings report.

Inovalon still expects to reach $1 billion of revenue by 2020, with the company believing that the current issues affecting its performance are temporary. With the stock crashing 24% on the news, investors don't seem so sure.

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Timothy Green 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.