Newsflash: GeoEye Is Not DigitalGlobe

Once upon a time, a certain well-known credit card company went public -- and its stock went through the roof. A couple years later, its archrival filed for an IPO and followed a similar path.

The success of the twin IPOs for MasterCard (NYSE:MA) and Visa (NYSE:V) has a lot of investors looking for a replay in tomorrow's expected initial public offering of satellite photoshop DigitalGlobe (which will soon bear the moniker "NYSE: DGI"). But if you keep your ear to the ground on what investors are saying, a lot of people seem to think that the best news about tomorrow's IPO is what it could do for the stock price of DGI-doppelganger (and Motley Fool Rule Breakers recommendation) GeoEye (NASDAQ:GEOY).

I'm not one of those people.

Spinners aren't winners
Oh, I have no doubt the IPO will be successful to some extent, and for some players. The bankers running it, for example -- JPMorgan Chase (NYSE:JPM), Morgan Stanley (NYSE:MS), et al. -- will no doubt make out like bandits. In Morgan Stanley's case, they'll also make for the exits; Morgan Stanley owns a 32% stake in the company, and will be cashing in a bucketful of shares in the IPO.

And of course, in a market mostly devoid of successful IPOs, I rather expect we'll see good things happen to whomever is so fortunate as to get a piece of DGI at the IPO price.

But that's not what Tom and Harriet Investor are talking about. They're all about what DGI's supposed IPO valuation tells us about GeoEye. Specifically, they're all about the likelihood that once people get a look at how much DigitalGlobe is "worth," they'll revise their thinking about GeoEye's valuation in a hurry.

Problem is, they won't -- or at least they shouldn't.

I mean, sure, the companies have their similarities. They're archrivals and duopolists in the satellite imagery space, for one. Each has (or will soon have) three satellites orbiting the globe, asking it to say "cheese," and snapping Polaroids for everyone from Google (NASDAQ:GOOG) to Yahoo! (NASDAQ:YHOO) to the National Geospatial Intelligence Agency. And if you believe the analysts, their revenues should quickly become as similar as their satellite counts. But aside from the obvious parallels, how do the companies really stack up against each other?

The question got to bugging me after I got a peek at GeoEye's first-quarter earnings report Tuesday, and so I did a little digging into the SEC files. Here's what I came up with:

*Free cash flow calculation based on $131.8 million in "cash paid for satellite and related ground related facilities construction" figure in company prospectus.

So that's how the companies stacked up yesteryear, with DigitalGlobe casting shadow over the firm that preceded it into the public markets. But what about this year? Is GeoEye closing the gap any?

Apparently not.

The racehorse and the donkey: an investing fable
So you see, GeoEye really isn't DigitalGlobe, and vice versa. Despite the similarities (sizeable debt loads, providing the same kinds of services to the same kinds of clients), when it comes to evaluating their potential as investments, these two firms are entirely different beasts. How do they differ?

• Size: DigitalGlobe is nearly twice as big as GeoEye by annual sales -- though that gap may be narrow with GeoEye's increased revenue from the launch of GeoEye-1.
• Profitability: DigitalGlobe is more than twice as profitable (per revenue dollar) as GeoEye ... and that gap is expanding.
• Profits that count: Finally, when it comes to the best kind of profit -- the cash-money kind that rustles in the wind, that you can count, the kind your landlord requires for your rent payment -- DigitalGlobe outclasses GeoEye by a mile. DigitalGlobe made money last year, and is starting off this year making even more. Both companies have been burning cash trying to get their new state-of-the-art satellites in the sky, but it looks like DigitalGlobe has been the more efficiently run operation. GeoEye? About the best we can say for it is that so far this year, GeoEye's not burning cash with quite as much abandon as it exhibited last year. Hooray? Once again, a lot of hope rests on GeoEye's new satellite GeoEye-1, but DigitalGlobe has already launched one successful next-generation satellite, and should beat GeoEye to getting two new birds in the sky when it launches Worldview-2 in December.

Foolish takeaway
I hate to say it, Fools, but I've got a sneaking suspicion that the folks at Motley Fool Rule Breakers are backing the wrong horse in this race. Whereas DigitalGlobe is shaping up to be a real racehorse, I'm starting to worry that GeoEye may be just a donkey in drag.