Playing Craps With Loaded Dice

There are no more snake eyes at Dice Holdings (NYSE: DHX  ) .

The online jobs specialist may have had a rocky run since going public over the summer, but its fundamentals are acing their job interviews.

This morning's third-quarter report is solid. Revenue soared 76% to $38.2 million. Earnings rose by 33% to $4.2 million, or $0.07 per share. (You can review last quarter's performance here.)The spurts aren't entirely organic, since the company's deal to acquire eFinancialCareers.com last year didn't close until the fourth quarter. But revenue would still have climbed by an impressive 38% on a pro forma basis, if the purchased property had been around in summer 2006.

Dice isn't like Monster Worldwide (Nasdaq: MNST  ) or Yahoo!'s (Nasdaq: YHOO  ) HotJobs. (Both Monster and Yahoo! also recently reported earnings.) Instead of mainstream workplace-recruiting sites, Dice runs sites dedicated to specific industries. Its namesake Dice.com has tech-job listings. ClearanceJobs.com is a hiring force for people with active security clearance. eFinancialCareers.com, as you may imagine, caters to the financial services sector.

The industry-specific bent isn't original. Jupitermedia (Nasdaq: JUPM  ) packs a similar scent. CNET Networks' (Nasdaq: CNET  ) IT properties aren't necessarily hiring grounds, though they certainly attract a fair share of opportunity networking. Then again, that may not be the ideal crowd for Dice to hang with, since both Jupitermedia and CNET continue to trade in the single digits.

So why can't Dice get any love here? The stock went public at $13 back in July. It has now posted two strong quarters since going public. Why can investors buy in today for less than its original IPO price?

You thought I had the answer? Dude, I'm scratching my head, too. As small as Dice may be, it's still pulling in double-digit net profit margins. The third quarter's showing clocked in with net income margins of 11%, and the company is projecting 11% to 12% during the current quarter, on a slight sequential improvement on the top line.

In other words, Dice is looking to earn between $0.07 and $0.08 a share in the current quarter. Analysts aimed too low with their $0.05-per-share target in the latest quarter. They're aiming too low with their $0.06-a-share profit projection for the fourth quarter.

I'm not suggesting that Dice should be hired as the next market darling. It's too small to be a bellwether. Priced at more than 40 times next year's earnings estimates, $13 proved to be an ambitious price tag on the IPO. However, now that Dice has proved itself worthy with two solid quarters, shouldn't it at least be considered for the apprenticeship program to be an eventual market darling? I think so.


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