Many people think of the online portal industry as a two-horse race between Yahoo! (NASDAQ:YHOO) and Google (NASDAQ:GOOG). But while they're jockeying to beat each other by a nose, the fillies galloping behind them are moving pretty fast. InfoSpace (NASDAQ:INSP), for one, closed out 2004 in excellent shape after reporting earnings of $0.50 a share and revenues more than doubling for the fourth quarter.
The company's profits came in 72% ahead of last year's fourth-quarter showing and a dime ahead of Wall Street's expectations. So if you haven't really considered InfoSpace as a worthy growth stock because of its rocky past, you may want to take another look.
After selling off its payment-solutions business last year, InfoSpace is growing its base of online-search and mobile properties, both organically and by acquisition. The mobile side is growing the fastest, on the strength of media download popularity and a series of small-company buyouts, but the company's bread and butter is still its active Internet search and directory core of services. That's where the company can squeeze the most out of every incoming penny, as operating margins this past quarter ran at an impressive 46% while coming in at just 25% on the mobile side.
Online search has been a gold mine for companies that can generate the traffic. Content sites are also doing well, but the portals have the advantage of drawing folks who are looking to be catapulted elsewhere -- and outgoing clicks translate into a healthy amount of pocket change.
Even large companies such as Microsoft (NASDAQ:MSFT) and Time Warner (NYSE:TWX) are feeling the favorable impact of online search, at their MSN.com and America Online properties.
As for InfoSpace, the future keeps getting brighter. It's looking to earn between $1.75 and $1.95 per share in 2005 on revenue of at least $375 million. Although the company may not be worthy of the same valuation multiples as Yahoo! and Google, it is trading at a significant -- and attractive -- discount, compared with the industry's two speediest specimens. As anyone betting on horses can tell you, even if you don't win or place, you still win money as long as you show. And InfoSpace is starting to show again.
