Anyone who has purchased a certificate of deposit (CD), opened a new credit card account, or refinanced a mortgage started with the same basic question: Where can I find the best rate? Given the breadth and complexity of today's financial products, it can be daunting to objectively make comparisons within one's own hometown, let alone nationwide. Wouldn't it be convenient if there were one central source of easy-to-use aggregated information? Fortunately for the decision-making consumer, there is: Bankrate (NASDAQ:RATE).
Bankrate.com is quite simply the Internet's premier consumer banking marketplace. As one of the most frequently visited sites, Bankrate tracks and compiles information on 250 products issued by over 4,800 financial institutions in 300 markets, encompassing all 50 states. Those looking for, say, a high-yieldingmoney market fund or a low-fee checking account can peruse hundreds of options at their leisure, in search of the right product.
Over 4 million visitors per month are turning to Bankrate.com, with 30% of the traffic directed from a network of 75 partners, including Time Warner's (NYSE:TWX) America Online, Yahoo! (NASDAQ:YHOO), and Bloomberg. Bankrate's content also extends far beyond the Internet. Its rate tables can be found in TheNew York Times, TheWall Street Journal, and more than 100 other publications.
Skeptics might ask where revenues are generated. After all, we've seen plenty of innovative websites without any discernible means of revenue other than capricious advertising revenues. To be fair, Bankrate is reliant upon its 450 advertisers, though its base comprises traditional banking institutions such as Citibank (NYSE:C), Wells Fargo (NYSE:WFC), and PNC (NYSE:PNC). The company is moving away from graphic ads, which can be traffic-sensitive, and toward the recurring revenue of subscription hyperlinks. Other sources of revenue include online sponsorships, and print publishing and licensing.
Operating income jumped 94% (excluding a gain from early debt extinguishment in the prior year) for 2003 to $9 million on record revenues of $36.6 million, fueled by strong growth along all business segments. Graphic ad revenues, hyperlink revenues, and print publishing and licensing revenues were up 32%, 56%, and 33%, respectively. These results were particularly impressive considering the unprecedented wave of mortgage refinancing activity that lifted 2002 sales results.
Bankrate is on track for a 10th consecutive profitable quarter. It remains debt-free, is generating consistent free cash flow, and somehow managed to improve upon gross margins already approaching 77%. Despite a staggering 250%-plus surge over the past 12 months in Bankrate shares, valuations remain reasonable. Backing out a onetime income tax credit of $3.1 million from fourth-quarter 2003, earnings per share still nearly doubled to $0.59. Based on a recent price of $16.58, the stock trades at a multiple around 28, lofty to be sure, but not inconsistent with its growth.
Last week's robust jobs report is predictably helping firms expected to benefit from an uptick in employment, such as Automatic Data Processing (NYSE:ADP) and Robert Half (NYSE:RHI), but taking a toll on rate-sensitive firms such as Bankrate. One has to wonder if the selling pressure may be a tad overdone. Sure, a rising rate environment will curtail consumer loan activity, but it will also spark renewed interest in CD and money market investments. Regardless of the direction future interest rates may take, consumers will always be in the market for advice. As long as Bankrate provides a marketplace conducive to linking buyers with sellers, shareholders should reap the rewards.
Check out our Rates Center for mortgage, home equity, checking, and auto loan rates. Or, if you want to refinance and haven't done so yet, check out our Home Center.
Fool contributor Nathan Slaughter is currently comparing car loan rates to replace his dilapidated Mustang, but he owns none of the shares listed.
