Small Cap Watch List (Track at Marketocracy) member Pre-Paid Legal Services, Inc. (PPD), announced financial results for the second quarter ended June 30, 2007. Membership revenues increased 4% to $106.9 million from $103.1 million for the same period last year. Net income increased 9% to $13.2 million from $12.1 million for the previous year. Diluted earnings per share for the quarter increased 22% to 99 cents per share from 81 cents per share for the prior year’s comparable quarter, higher than the net income increase, due to an 11% decrease in the weighted average number of outstanding shares. According to Yahoo! Finance, there were no Wall Street estimates with which to compare the number.

From an earnings quality standpoint, cash flow from operations grew at a slightly faster rate than net income, which is generally a good sign. Much of the cash flow was returned to shareholders through the buyback plan, but the selling shareholders probably shouldn’t have, as the average transaction price was below $49 and well below the current $68.50 share price. It seems the company can at least spot a good buying opportunity in its own shares.

The press release did not include a balance sheet or detailed cash flow statement, so a more thorough analysis will have to wait for the 10Q.