The owner of Ask.com, Match.com and more than 50 other websites, InterActiveCorp. (NASDAQ:IACI), posted much better than expected growth in the second quarter and its stock popped 11%. Is it time to buy IAC?

Although it has one of the worst names for a business I can think of, IAC’s numbers were surprisingly good. Its second quarter revenue jumped 23% to $485 million thanks to its Web-search products and growth in online dating subscribers. IAC’s net income was up 212% to $42.4 million from $13.6 million in the same 2010 period. And its adjusted earnings per share of 62 cents were 63% more than 11 analysts’ 38-cent average forecast in a Bloomberg survey.

Besides this strong performance, are there any other reasons to own IAC? Other signals are confusing — suggesting a turnaround might be under way after a period of weak performance. Here are three:

• Under-earned its capital cost. IAC is earning less than its cost of capital — but it’s improving. How so? It produced positive EVA momentum, which measures the change in “economic value added” (essentially, after-tax operating profit after deducting capital costs) divided by sales. In the first half 2011, IAC’s EVA momentum was 9%, based on first six months’ 2010 annualized revenue of $366 million, and EVA that improved from -$244 million annualizing the first six months of 2010 to -$1.5 billion annualizing the first six months of 2011, using a 12% weighted average cost of capital.
• Shrinking but cleaning up its balance sheet. IAC has been shrinking with thin profit margins. Its $1.7 billion in revenues have tumbled at an average rate of 20% over the past five years, and its net income of $30 million represented a thin 2% net margin. Its debt has declined faster than its cash. Its debt fell at 42% annual rate, from $856 million (2006) to $96 million (2010), while its cash slumped at a 13% annual rate, from $2.3 billion to $1.3 billion.
• Expensive stock — depending on which growth rate you use. IAC’s price-to-earnings-to-growth ratio of 2.64 makes it expensive (a PEG of 1.0 is considered fairly priced). IAC’s P/E is 60, and its earnings per share are expected to grow 22.7% to $1.44 in 2012. But if you look at its expected 2011 earnings growth of 805%, the stock looks cheap. And if you apply its Q2 profit growth rate of 212%, its PEG is a cheap 0.28.

IAC stock is up 77% in the past year, so the best argument for investing in IAC is that it might continue to provide investors with upside surprises. I might take a look at this stock again if it gets taken down in the wave of selling that seems poised to continue thanks to Washington turbulence.

Peter Cohan has no financial interest in the securities mentioned.