Editor's note: A previous version of this article indicated SourceForge had not filed its previous two 10-Q reports. It has, and we regret the error.
It's tough to draw a bead on the valuation of a company that doesn't tell us all there is to know about its operations. Tech news publisher and open-source software wrangler SourceForge (Nasdaq: LNUX), for example, just gave us a full-year report without cash flow information. Management has also skipped that step in the two previous earnings press releases. I mistakenly wrote that the company had not yet filed 10-Q statements for the past two periods, and for that I apologize. My gripe still stands, however, against companies that don't include cash flow information with their releases.
SourceForge today is quite a different beast than the VA Software of yesteryear, having significantly shuffled around its segments and product offerings over the past couple of years. So you see that it is nigh on impossible to even make an educated guess about the capital expenditures, depreciation, and other important cash flow details.
In the earnings call, CFO Patty Morris told analysts to hold on for the 10-K filing if they wanted segment details or cash flows, though she did mention $800,000 in operating flow for the quarter. That adds up to about $3.5 million in operating cash flow from continuing operations for the year, pieced together from three earnings calls and one proper statement.
That's certainly better than the $330,000 produced on that line last year, or the long string of negative operating cash flows before that, so we know that SourceForge is going somewhere fairly good. But, without capital expenditures, I can't say anything about free cash flow. And there ain't no depreciation and amortization data either, so Tom Gardner's structural free cash flow metric is right out, as well.
What I really wanted to talk about today was whether the 20% drop in the SourceForge stock price was anywhere near justified. The company now lives in penny-stock land, and has shed more than 35% of its year-ago valuation. But the best I can do is to compare some standard valuation ratios with those of the competition -- and even that is tricky. Trading at 32 times trailing earnings from continuing operations doesn't mean much without a market context.
CNET (Nasdaq: CNET) is perhaps the closest competition on the publishing side, but that company has negative trailing earnings, so no P/E ratio there. Same goes for software-publisher peerlet Borland (Nasdaq: BORL), while the competitors that are profitable are so far from comparable to SourceForge's business model that it's not even funny.
I mean, the company lists Microsoft (Nasdaq: MSFT) and Google (Nasdaq: GOOG) and IBM (NYSE: IBM) as rivals, or at least it did last year. I guess we'll have to wait for that 2007 10-K statement alongside the analysts to see who SourceForge thinks it is competing against now.
Further Foolishness:
Microsoft is a
Motley Fool Inside Value
pick, and CNET is a
Motley Fool Rule Breakers
recommendation.
Fool contributor Anders Bylund is a Google shareholder, but holds no other position in any of the companies discussed here. He might consider SourceForge some day, but not with such an incomplete financial picture. You can check out Anders' holdings if you like, and Foolish disclosure will make your day, every day.
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