Consulting firm BearingPoint () helps companies set up internal systems to monitor financial results, among other things. So it was quite an embarrassment when a $93 million accounting error was discovered there in 2004, causing a delay in the release of 2004 financial results due in mid-October. That, plus a related Securities & Exchange Commission inquiry, took its stock to 5.28 on Apr. 21 from 8.20 a week before. It has since risen to 7 as some pros bought in. One is Spencer Fleischer of investment outfit Friedman Fleischer & Lowe, which acquired some 6 million shares at 6.75 each. Despite its woes, BearingPoint's long-term growth rate is intact, says Fleischer, as it is "strongly positioned in the fast-growing business services market." Adam Frisch of UBS () (it has done banking for BearingPoint and owns shares) says the smart money is focusing on the company's operating leverage, cost-cutting, and cash-flow growth, which should be evident in 2006 and 2007. Frisch says "BE is the most attractive investment opportunity in our coverage" based on its "untapped" earnings power. He sees it hitting 12 in a year. The answers that the SEC wants will be provided, he says, when the company posts its delayed results. He sees a loss of 2 cents a share in 2005 (due in part to restructuring and the cost of the PricewaterhouseCoopers audit on the accounting error), on sales of $3.7 billion. But Frisch forecasts profits of 43 cents in 2006 on sales of $3.8 billion.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.