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.
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