Friend to investors, friendly rival to Morningstar, and, yes, rival to the Fool itself, TheStreet.com (NASDAQ:TSCM) reports its Q1 2007 earnings numbers Thursday morning. How will the Street react to its namesake?

What analysts say:

  • Buy, sell, or waffle? Seven analysts walk TheStreet, giving it six buy ratings and a hold.
  • Revenue. On average, they're looking for 29% sales growth to $14.4 million.
  • Earnings. Profits are predicted to rise 44% to $0.13 per share.

What management says:
Looking back on TheStreet.com's fiscal 2006 performance in February, CEO Thomas Clarke called the results "solid." Quite a bit of understatement from the firm made famous by over-the-top booyah-king Jim Cramer. Sales increased 51% in comparison with fiscal 2005's numbers. Even more impressive, operating profitability also grew by half -- a whopping 720 basis points. Combine those numbers, and the net effect was to grow the firm's bottom line by more than 120%.

Looking forward, Clarke described TheStreet.com as having a "diversified revenue model" but as focusing now on "expanding and monetizing the advertising-based revenue stream" in particular. The dot-com industry's advertising-related bust of a few years ago notwithstanding, Google's (NASDAQ:GOOG) recent $3.1 billion purchase of DoubleClick -- out of the jaws of Microsoft (NASDAQ:MSFT), no less -- argues strongly in favor of a new viability for advertising-based business models.

What management does:
On the bottom line, TheStreet.com has grown steadily more profitable (net margin-wise) in each quarter for the last year and a half. Higher up the income statement, we see that the operating margin has been growing all year long, and even the gross margin is again moving up.

Margin

9/05

12/05

3/06

6/06

9/06

12/06

Gross

63.8%

62.3%

62.3%

62.4%

62.6%

63.7%

Operating

15.7%

14.5%

17.2%

18.3%

19.5%

21.7%

Net

(2.5%)

0.7%

9.9%

22.0%

22.9%

25.3%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Getting into the nitty-gritty of the business, however, I'm sensing mixed signals at TheStreet.com. The firm reported an 80% increase in page views last year, but "only" a 51% increase in revenues -- which looks to me like a picture of diminishing returns. On the other hand, average monthly "UVs" (or "unique visitors" to the site, in the parlance of the industry) grew 46%, which when compared with the revenue growth suggests the opposite -- that TheStreet.com is extracting greater revenue from each newcomer to its site.

One thing there's no confusion about, however, is that TheStreet.com is benefiting from scale as it grows. As revenue climbed 51% last year, cost of services provided grew only 46%, and selling, general, and administrative expenses just 32%. Result: The firm gets to drop more and more pennies per dollar of revenue straight to its bottom line. The only question that remains is what will happen if 2001 repeats itself, and TheStreet.com's corporate customers stop spending quite so much on advertising.

For more on TheStreet.com and its peers, read:

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Fool contributor Rich Smith owns shares of TheStreet.com. The Fool has a disclosure policy.