Como se combate o populismo? "Com eleições", responde Fukuyama

[Alfred E. Neuman]

STOCK of the WEEK - NOV 8, 2004 : Autobytel (nasdaq: ABTL)


Matt Ragas, co-editor of FindProfit recommends buying shares of Irvine, Calif.-based Autobytel (ABTL), a marketer of automobiles on the Internet, with five websites and lead generation and information services sold to car dealers.

Autobytel shares are down 58% from their April high of $17, and 23% higher than their August low of $5.72.

Based on Friday's close of $7.05, Autobytel trades for 29.4 times estimated 2004 earnings of $0.24 per share, but at a price-to-earnings growth ratio of 0.73. The company has a market capitalization of $294 million.

On October 21, Autobytel announced "partial" third quarter financial results showing revenue of $33 million, a 43% jump from the third quarter of 2003.

The company declined, however, to release earnings, citing an internal accounting review directed by their audit committee to determine whether $450,000 to $900,000 of "certain unapplied credits" were recognized as revenue during the four quarters ended March 31, 2004.

ABTL was hammered more than 20% on the news, and fell to as low as $6.28 intraday on October 27. Ragas says the stock, which trades for 16.8 times expected 2005 earnings, sports one of the cheapest valuations in the Internet sector. And Ragas is not worried about the accounting review.

We're not overly worried about these accounting concerns, since ABTL has a relatively simple business model," says Ragas. "Unless there's been outright fraud, we think this will soon blow over. Honestly, our only real area of concern at this point is about the company's high levels of receivables...an area we will watch closely." For the quarter ended June 30, 2004, net receivables were 29% of current assets. Ragas is encouraged by the company's $1.34 in cash per share, and it's announcement two weeks ago that cash levels grew $2.3 million to $56.8 million, as of September 30, 2004.

"We've had a long history with ABTL, first buying the stock in September 2002 at $1.84 per share, before selling out of it at $6.12, $10.70 and $13.45 per share," says Ragas. "In April, we shorted the stock at $14.78, covering it for a nice gain soon thereafter." Ragas also says that concerns "about rising marketing costs, the impact of taxes, and a frothy valuation have been recognized by the market and are now more than priced into the stock." He recommends the stock for "high risk, high return" investors.

The investment above is recommended in FindProfit.