Maybe I've ripped into InsWeb (NASDAQ:INSW) for the last time. If the insurance lead generator is to be believed, the current quarter will be an important one in setting the trend for a potential breakthrough year come 2007.

This morning, InsWeb is reporting that it will post a substantially narrower loss for the December quarter. The company is guiding shareholders to expect a loss of between $300,000 and $500,000 for the period. That holds up nicely compared to the $2.1 million it surrendered a year earlier and the $1.6 million it recorded as a deficit in this year's third quarter. The top line should come in relatively flat with last year's $5.8 million fourth-quarter showing, as InsWeb's range calls for revenues to clock in between $5.7 million and $6 million.

The margin improvement in its flagship auto and term life insurance lead businesses is also taking place during the industry's seasonally sleepy December quarter.

"We look forward to fiscal 2007 as a pivotal year in the history of the Company," CEO Hussein Enan notes in this morning's press release, and it's easy to see why. If the company can trim its costs and plump up its margins during a quarter that has historically been its most challenging, we may actually find ourselves looking at a profitable company at some point next year.

Turning the corner would be huge for InsWeb. After racking up $191.6 million in accumulated deficits, the company's got enough tax-loss carry-forwards to offset potential profits for some time.

A profitable InsWeb, or at the very least one that is no longer burning through its greenbacks, would also help defray my ardent warnings that the company is a cash trap.

Yes, InsWeb's coffers are ripe with cash since the company went public seven years ago at $17 a share. Adjusted for a 1-for-6 reverse split after the dot-com crash of 2001, InsWeb actually went public at $102 a share. With its stock price perpetually levitating in the ballpark of its balance-sheet cash, it's been a disappointing ride for those who figured they were buying a value stock while it was still oozing greenery out of that cash cushion.

Date

Cash per share

12/31/03

$5.26

12/31/04

$3.72

12/31/05

$2.53

9/30/06

$1.83



I got burned before. Nearly three years ago, I singled out InsWeb in an article entitled Five More Stocks Under $10. The stock was trading at $4.81. With its cash-per-share balance at $5.26, what could go wrong? More losses. More capital outflows. Less cash cushion.

Generating leads can be a sweet business. Two of the more successful picks in the Rule Breakers growth stock newsletter service -- The Knot (NASDAQ:KNOT) and Bankrate (NASDAQ:RATE) -- have thrived by generating leads to wedding services and financial institutions, respectively. Then again, The Knot and Bankrate are also definitive sources in editorial content in their niches. The ability to syndicate content that wins over leads on the cheap is a major advantage to companies like InsWeb in insurance products and Autobytel (NASDAQ:ABTL) in the car world -- companies that are clawing with the pack to draw eyeballs.

So let's keep a close eye on InsWeb when it ultimately does post its fourth-quarter numbers. If the results are clean and 2007 really will be the year the company finally breaks into the black, there might finally be a cash cushion worth bouncing on.

Longtime Fool contributor Rick Munarriz can't recall buying insurance online, though he recognizes its usefulness in shopping around. He does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.