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 (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, 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.

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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.

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