Quepasa Isn't as Fast as It Looks

Quepasa (AMEX: QPSA  ) is growing again, but take last night's growth metrics with a grain of salt.

After all, it's easy to get excited when you see revenue soaring 240% for the quarter. How can one not get pumped after reading that registered users have soared from 27.3 million to 78.1 million over the past year?

When the upticks are this meaty, it's easy to dismiss that the $5.5 million net loss is nearly as large as the $6.3 million in reported revenue during the period.

Quepasa is growing, but let's dig a little deeper. Most of the growth is fueled by its acquisition of the substantially larger parent company of social discovery website operator myYearbook in early November. Perhaps not surprisingly, the company's earnings release emphasizes the combined metrics when it benefits the company and then switches to reported results when that's its better side.

Last night's press release claims that the two companies would have combined for $36.8 million in revenue in 2011, but does that come anywhere close to the reported 240% top-line surge in the reported results for the fourth quarter? No. Not even close. The earnings release doesn't divulge the combined results for 2010, but fishing out last summer's press release indicates that the combined companies generated $33.6 million in revenue through the four quarters ending in March. Suddenly the growth seems far more modest.

If we want the 2010 figure, the summertime press release has myYearbook at $23.7 million in revenue for the year. We know that Quepasa rang up $6.1 million, so it adds up to $29.8 million. The end result is that revenue climbed 24% for the combined companies in 2011.

That's certainly not too shabby. Given the dramatic plunges in revenue and monthly active users at Quepasa alone in its last quarter, we're clearly looking at a company where myYearbook is driving the performance now.

As for the registered users surging, the combined companies had 70.9 million registered users at the end of March. Winding up at 78.1 million nine months later for the incremental metric is solid, but not the blowout growth suggested in last night's release.

You're a good company, Quepasa. Make it a little easier to compare things on an orange-to-orange basis.

After all, investors do have more choices these days if they want to buy into the social networking space. Over the past year alone we've had a few relevant IPOs.

  • Jive Software (Nasdaq: JIVE  ) -- a provider of social networking software for companies -- went public two months ago.
  • BazaarVoice (NYSE: BV  ) -- specializing in social commerce -- went public last week.
  • LinkedIn (Nasdaq: LNKD  ) -- the most prominent social networking website after Facebook -- was one of last year's more successful IPOs.
  • Renren (Nasdaq: RENN  ) -- China's leading social networking site operator -- is trading for well below last May's IPO price.

Buying Quepasa for its popular myYearbook trophy wife isn't a bad idea, but investors will have to do a little digging over the next four quarters to see through the non-organic growth.

What's happening?
Quepasa and Renren have some -- but not enough -- of the growth traits that stand out to members of the Rule Breakers newsletter. The growth stock service has identified a new rule-breaking multibagger that's an active recommendation. Learn more in a free special report -- check it out now.

The Motley Fool owns shares of LinkedIn. Motley Fool newsletter services have recommended buying shares of LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1799156, ~/Articles/ArticleHandler.aspx, 10/22/2016 12:43:39 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 15 hours ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
MEET $5.45 Up +0.04 +0.74%
MeetMe CAPS Rating: *
JIVE $3.96 Down -0.02 -0.50%
Jive Software CAPS Rating: *