When things are going good, things are going very good. Following stellar reports out of Internet stars Yahoo!
For the first quarter, the online discounter reported gross bookings (formerly referred to as GMS or gross merchandise sales) up 79% to $93.4 million. Gross profit grew 83% to $8.5 million, far outpacing the 38% growth in administrative expenses and a 14% increase in sales and marketing expenses. That helped Overstock cut last year's $0.26 per-share loss to $0.14, or $2.2 million.
Absent from President Patrick Byrne's shareholder letter were the Lao Tse references from last quarter's "The rhythm of the Dao is like the drawing of a bow" letter. In its place was a brilliant SAT-worthy analogy explaining the relationship between the company's cash and inventory:
One can think of cash and inventory as a physicist thinks of mass and energy: One is a form of the other, and they can be managed so one turns into the other, and then back. Our practice has been to run cash low in the late summer by turning that cash into inventory: As Christmas approaches, we run the inventory down, turning it back into cash.
From where Byrne drew the inspiration for that, one can only guess. But it's such frank discussion of the business for the benefit of the average retail investor that makes this company so likeable.
It's apparent that Overstock is gaining momentum. On top of sales growth, margins are also expanding -- which is key to any investment thesis regarding the stock. And whether you believe Overstock is undervalued or that competitor Amazon.com
Fool contributor Jeff Hwang owns shares of both eBay and Overstock.com.