3 Things to Know About Bankrate

Wall Street is pounding Bankrate (Nasdaq: RATE  ) today, after the financial-rate publisher missed analyst expectations. The company posted adjusted earnings of $0.33 a share on $40.2 million in revenue. Mr. Market's targets called for a profit of $0.34 a share on $42 million in revenue.

However, today's sellers seem to ignore three crucial facts.

1. Bankrate is still growing quickly
Revenue had to climb 59% to hit $40.2 million. Sure, the market was spoiled by Bankrate's previous sales leaps, including a 72% increase in the second quarter and a 77% spike in the third. Accelerating revenue growth is a beautiful thing, but it's never realistically sustainable. Are you telling me that 59% growth isn't good enough in this crummy market?

Earnings growth is a different story. Adjusted earnings of $0.33 a share -- backing out stock-based compensation and non-cash asset impairment charges -- are flat with last year's showing. Like most companies coping with margin contraction, Bankrate should need a few more quarters to straighten that out.

2. Bankrate is getting more efficient
It's easy to doubt the power of generating financial leads on the Web. From online insurance specialists like InsWeb (Nasdaq: INSW  ) and Insure.com (Nasdaq: NSUR  ) or real estate dabblers like Move (Nasdaq: MOVE  ) and Tree.com (Nasdaq: TREE  ) , drumming up prospects over the Web these days is no easy way to make a living.

Unless you're Bankrate, apparently. Its online revenue grew 68% during the quarter, and the site's page views surged 26% to 164.7 million. When revenue grows faster than page views, it means that Bankrate's bringing in more money from the average visitor.

3. This story is just getting started
Bankrate is starting to branch out, with specialized sites dedicated to everything from insurance to credit cards. The company also launched Bankrate China back in April, giving the company even more expansion room abroad.

Investors looking for an e-finance angle in China are better suited to check out pure country-specific companies like China Finance Online (Nasdaq: JRJC  ) for stock data and E-House (NYSE: EJ  ) for real estate, but Bankrate's presence can't be ignored.

Besides, the stock that once traded at a fat premium to the market is now on sale for less than 20 times earnings, provided you look forward to the $1.77 a share that analysts forecast for this year.

Go ahead and sell, sellers. You're just creating a sweeter bargain for the rest of us.

Further highly rated Foolishness:

Bankrate and China Finance Online are Motley Fool Rule Breakers recommendations. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz has been known to chase yields on the Bankrate.com site from time to time. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (7)

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  • Report this Comment On February 06, 2009, at 4:14 PM, markm1234 wrote:

    There's an important mistake you've made in your Pt #1 that changes your thesis. You mention 59% revenue growth, but that includes the impact of several LARGE acquisitions. The actual organic, or "real" revenue growth is about 5 or 6%. That's a very different profile than the one you've laid out. It's not that I don't like Bankrate and it's business model, you just need to understand the real growth dynamics of this business in order to properly assess its value. Thx

  • Report this Comment On February 09, 2009, at 10:27 PM, Alternatereality wrote:

    I agree with Mark. They bought all their growth, and have a very bad record regarding successfully absorbing acquisitions. The $1 million mistake with CreditCardGuide.com is only the latest example of how they are not very good at due diligence. Evans' salvation has been that the core business he inherited has been good enough to mask his acquisition mistakes.

  • Report this Comment On December 30, 2009, at 6:54 AM, nmwando wrote:

    the truth is with the acquisition of bankaholic.com and creditcardguide.com what they got was an unrestricted access to financial traffic that is expensive as diamonds to buy from google. Its really a good move if you think about. Its like marrying that beautiful woman instead of just buying her dinner.. and taking her home. :)

    Nick

    Badcreditebook.com

    thanks.

  • Report this Comment On October 05, 2010, at 6:29 PM, creditexpert wrote:

    It is interesting to note the method by which Bankrate grew, which perhaps provides an explanation for the company’s huge jumps in second and third quarter revenue and relative decrease in fourth quarter earnings. Bankrate expanded very quickly by buying up the competition, making for increased earning potential that stems from efficiency optimization in the newly acquired assets. One implication of this shopping spree is the creation of a dearth of independent competitors. Many newly acquired sites retained their names under the Bankrate umbrella and consumers looking for sourcing variety may not realize this. Still, competitors such as CardHub.com still exist, but are they next on the purchase wish list?

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