Online market-research veteran Greenfield Online
Survey says:
- Buy, sell, or waffle? Seven analysts follow Greenfield these days. Three of them say that you should buy the stock, and the other four advocate a "hold."
- Revenues. Wall Street expects, on average, to see tonight's sales number land at $22.6 million, 14% below last year's comparable quarter.
- Earnings. The analysts are predicting an 80% year-over-year decline to $0.02 of earnings per share. Ouch.
What management says:
Greenfield acquired European survey company Ciao in April 2005 and now seems bent on making the most of that purchase. Ciao's two subdivisions, market research and comparison shopping, will be separated into distinct operations. The research arm of Ciao is opening international offices at a furious pace in places such as Australia, Japan, and India, and much of the company's growth strategy appears based on this international expansion strategy.
What management does:
A one-time income tax reassessment gave Greenfield's net margins a shot in the arm last summer, but the Ciao deal came back to spite net margins six months later. A goodwill impairment charge related to a reassessment of Ciao's real value put a $91.8 million hurting on the bottom line, which explains the scary rolling profit margin over the past two quarters. Back that charge out, along with that tax benefit, and you get much more reasonable -- though still declining -- net margins.
|
Margins % |
12/04 |
3/05 |
6/05 |
9/05 |
12/05 |
3/06 |
|---|---|---|---|---|---|---|
|
Gross |
75.1 |
75.2 |
73.7 |
72.1 |
72.7 |
73.4 |
|
Op. |
16.1 |
18.6 |
18.0 |
14.8 |
13.0 |
11.4 |
|
Net |
12.9 |
15.4 |
37.6 |
32.7 |
(73.9) |
(70.9) |
|
Adjusted Net |
12.6 |
15.3 |
14.6 |
13.0 |
11.8 |
9.2 |
One Fool says:
Greenfield has seen its share of hard times over the past two years, to the point of appointing a "Special Operations Committee" to oversee the turnaround of its business. That committee was disbanded early in this past quarter, because the board of directors thought the turnaround was complete. They must know something we don't.
Sales have been unpredictable, and the margins that matter most are declining at an alarming rate, even if you back out impairment charges and one-time tax benefits. It's hardly the financial fingerprint of a management team humming on all six cylinders, and that trend can't continue indefinitely. It's high time to ask for more predictable performance from Greenfield. The company is still making a profit, and free cash flow is positive too, so there should be some room to maneuver and set operations up for a more profitable future.
I've been a Greenfield panelist since 1995, when the company was still growing into its toddler breeches. The stock even made a brief appearance in my portfolio last year, based on the promise of the Ciao acquisition. I'm still on the panel and get more survey invitations than ever. That's an encouraging sign for investors, since it points to increased customer interest in the Greenfield panels, though I must caution that it's strictly anecdotal evidence. It's up to the company to prove that sales are indeed taking off -- and that would come as a shock to the analysts.
Competitors:
- Harris Interactive
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(NYSE:IT) - Forrester Research
(NASDAQ:FORR) - Omniture
(NASDAQ:OMTR) - Opinion Research
(NASDAQ:ORCI)
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Fool contributorAnders Bylundno longer holds any position in the companies discussed here. He got two survey invitations in the hour and a half it took to write this Take. You can check outAnders' holdingsif you like. Foolishdisclosuregives you clear insight, every time.
