Carl R: One of the notable facts illustrated by that chart is NETP's failure to rise as soon as or as far as other companies and its failure to bounce off the post-crash lows as convincingly as most of the others.
EPNY is often used as a comparison because they had an IPO about the same and for a few months had comparable revenues and share prices. But since then EPNY's rate of growth in revenues has consistently been higher than NETP's and this is reflected in the share performance.
EPNY's initial surge took it sooner, further and faster than NETP is generally attributed to the fact that the CEO, Siboni, had a following in Silicon Valley, and he aggressively promoted EPNY and got a number of the large consultant companies to adopt it very early. This starburst beginning gave the share price momentum. With the inflated share value it was then able to make acquisitions which,in turn, further fuelled its rate of growth. It is interesting that NETP has 5-6% more institutional investors than EPNY, so it could be that EPNY's higher profile has won it more of a following among retail investors. The analysts covering EPNY are generally from bigger brokerage houses than those following NETP. My guess is this is because of the market capitalisation. NETP does not come unto the screen of some of the big houses because of its small cap status. However, NETP says that 7 new analysts are considering initiating coverage.
Why is it that NETP failure to bounce most closely accords with the CMGI and ACXM? CMGI is a proxy for the whole internet sector so I suppose one could argue that because NETP does not have a distinguishable profile in the market, it is simply subjected to the backlash against the sector. But this does not explain why NETP did not take off as soon as or go as high as CMGI in the first place.
ACXM might be in the same boat. It appears to be a niche company in data analysis. It's recent rate of growth is much lower than NETP's but it is a "virtuous" company behaving nicely without adequate recognition.
I don't want to flog a dead horse, but I think this and other similar comparisons have a very clear message for NETP. Share price is causative of additional growth. Share price is dependent to some extent on the market's awareness of and appreciation of a company's story. PR is not an accessory or some kind of sinful indulgence only the weak engage in - its a fundamental to be taken as seriously as anything else.
Finally, this is only a one year comparison. It might be that in 2, 3 or 5 years, the tortoise will beat the hare. As the market gets to understand the differences between dot.coms, B2C, B2B, infrastructure stocks, companies that are tied to specific platforms and those that our agnostic arms dealers, as well as those which have products protected by patents, and as NETP achieves profitability - possibly ahead of some of the comparative companies - then it could be that it will remorselessly overtake them in valuation. If it continues to lag then I think the case for it being bought out becomes compelling. Companies whose stock price underperforms usually do get bought out. |
