Taleo's Talent Show

Staffing-software developer Taleo Corporation (Nasdaq: TLEO  ) saw a nice move in its stock price yesterday. Its 9% hike to $12 provided some relief to shareholders, who've had a bad year so far; the stock was $14 in January. But the company continues to grow its revenues at healthy rate, a trend expected to continue into 2007.

In third-quarter earnings released Monday, revenues increased from $19.9 million to $24.9 million. In all, there were 110 new customers, which include biggies like Omni Industries and Phelps Dodge (NYSE: PD  ) .

Taleo is also showing progress on the bottom line. In the quarter, the net loss was $757,000, compared to a $2.5 million loss in the year-ago period.

Founded in 1999, Taleo is a top provider of so-called talent management software, helping companies with the recruiting, assessment and management of their workforces. The software's benefits include lower costs, greater employee satisfaction, and higher-quality recruits.

Taleo delivers its software on demand, a hallmark of other successful next-generation software companies such as Salesforce.com (NYSE: CRM  ) and NetSuite. Customers can access the software via the Web, creating lesser requirements for information technology (IT) support and hardware/server installations. New versions of the software don't require mass upgrades, either, since the updates are made on Taleo's servers.

Taleo has a strong focus on sales, with a telesales department that's been successful in building up the company's small- to medium-sized business segment. In addition, the company is effectively leveraging partnerships with major companies such as Accenture (NYSE: ACN  ) , ADP (NYSE: ADP  ) , and Fidelity to sell to big enterprise customers.

The company has also been aggressive in launching new products such as its recent Talent Intelligence offering. Thus, as the customer base grows, it can realize cross-sale opportunities.

However, as is common for upstart companies, Taleo has had some internal problems, including a breakdown with its collections from customers. New CFO Katy Murray appears to be taking the necessary actions to fix the problem.

On the conference call, management was upbeat about 2007, saying that 20% revenue growth looks like a good bet. Given that run rate, the company's valuation is about 2.2 times revenues.

In fact, that does look cheap relative to other on-demand players, such as Salesforce.com, which trades at a forward P/E multiple of 7 (using consensus estimates for the next year). In other words, so long as Taleo continues its growth path -- and fixes its internal problems -- there seems to be more room for expansion in the stock price.

Further Foolish talent:

Accenture is anInside Valuepick. For more great companies trading at deep discounts, take a 30-day free trial of the service.

Fool contributor Tom Taulli does not own shares mentioned in this article.He is currently ranked 55 out of 12,983 in CAPS.The Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (3)

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.

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: 517375, ~/Articles/ArticleHandler.aspx, 9/20/2014 4:04:45 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...


Advertisement