Why Coursera Stock Exploded 51% Higher Today

Coursera (NYSE: COUR) stock charged out of the gate Friday morning, surging 51% through 9:40 a.m. ET after announcing beats on both top and bottom lines.

Heading into Coursera's second-quarter report last night, analysts forecast the online education company would earn a $0.01 per share adjusted profit on sales of $164.4 million. Coursera beat both predictions, however, reporting adjusted profits of $0.09 per share and sales of $170.3 million.

Coursera's big earnings beat

Not all the news was good. Although Coursera grew sales by 11% year over year and moved beyond last year's break-even profit to a positive "adjusted" profit, the company didn't earn a generally accepted accounting principles (GAAP) profit. When calculated according to GAAP , Coursera's "earnings" were actually a $0.15 per share loss.

Still, that was better than the $0.21 per share Coursera lost one year ago. That's a win for Coursera.

Coursera also generated positive free cash flow (FCF) in the quarter -- $17 million -- versus burning cash in last year's Q2. The company showed strong revenue growth in all three business segments, with enterprise revenue up 8%, consumer revenue up 12%, and revenues from degree programs rising 14%. CEO Ken Hahn pronounced himself "pleased" with all these results.

Is Coursera stock a buy?

But is all this enough to make Coursera stock worth 50% more today than it was yesterday?

Actually, it might be. On the one hand, guidance isn't all that great, with Coursera promising no more than the $700 million or so in revenue that Wall Street was already expecting. On the other hand, consider that at $1.75 billion in market cap, Coursera stock might cost only 25 or so times FCF -- if it can continue generating $17 million in FCF quarter-in and quarter-out. That's not a terrible valuation, given the quick flip to FCF positivity .

True, current analyst estimates show Coursera generating only $55 million in FCF next year. However, these same analysts were wrong about Coursera in Q2, and they could be wrong again.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .