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Strategies & Market Trends : Puff Daddy's Mo' Money Mo' Problems -- Ignore unavailable to you. Want to Upgrade?

To: Jack Hartmann who wrote (703)	4/1/2000 1:05:00 AM
From: SouthFloridaGuy	Read Replies (1) \| Respond to of 896

Find Internet Value at US SEARCH individualinvestor.com Research Analyst: Justin Oppelaar (3/29/00) Suppose you're the human resources manager of a big tech company, desperate to hire fresh talent to fuel your business. One day, you happen upon a skilled young programmer with an impeccable resume, and you snap her up immediately. But five months later, you find out she never went to MIT like her resume claims, or worse, she's been convicted of computer fraud in five states, and you have to fire her on the spot, swallowing all the recruiting expenses you incurred. Like this Article? How could you have avoided this disaster? US SEARCH.com Inc. (NASDAQ: SRCH - Quotes, News, Boards) believes it has a solution, and ? surprise, surprise ? it's Internet-based. US SEARCH operates a service, both over the Internet and via telephone, whereby clients can get all sorts of public record information about individuals all over the United States ? for a fee, of course. The company offers access to data such as addresses, names and known aliases, phone numbers, property ownership, and dates of birth and death. US Search also provides information on all sorts of public court records nationwide, including records of court proceedings, civil judgements, and even criminal convictions. Originally, US Search set out to sell these services primarily to consumers directly, with clients like individuals seeking out a lost friend or family member. Indeed, a major portion of the company's business is still in consumer services like adoption and school class reunions. However, the operation that holds the most promise for US Search going forward is its line of data services for business. The company operates an extensive database of records on both individuals and businesses. Business clients can search for everything from whether a day care center is properly licensed by the government, to records of personal bankruptcies and tax liens. The capability to search through those data has drawn more than 1,400 corporate accounts as of the end of the 1999, according to a February 4 research note by Robertson Stephens analyst Lowell J. Singer. That's up from 930 at the end of the third quarter and a mere 500 at the end of the second quarter. And US Search is signing over 150 new accounts each month on average, the analyst added. US Search is not yet profitable, meaning that client growth is crucial for the company to gain economies of scale in its business-to-business division. As the company grows, it can leverage costs over a wider base of users, thereby moving the bottom line ever closer to positive territory. While US Search has managed to grow its business at a stunning rate in the past several quarters, its performance has not been immune to a few speed bumps along the way. In its fourth-quarter earnings release, for example, the company's bottom line came in a penny ahead of plan at a loss of $0.36 a share, but revenue was slightly lower than Wall Street had anticipated. That sent the stock skidding from roughly $9.00 to around $4.50. It has since recovered partly and is trading at a recent $5.13. The downturn left US Search shares trading at less than four times trailing twelve months' sales and about 2.7 times book value ? astoundingly cheap for an Internet company that's grown sales over 200% in the last year and has an estimated five-year growth rate of 50%. What's more, US Search's balance sheet is clean as a whistle: the company had $24.7 million in cash on its books as of September 30 and long-term debt of $72,000 - less than most medical students. US Search has parlayed a great idea into some stellar revenue expansion, but it is still going through some growing pains, which are showing on the profit and loss statement. The primary risk for investors right now is management's ability to manage growth and keep revenue gains coming smoothly. The company's record so far is somewhat erratic, but the two analysts covering the company have stuck by their 2000 revenue estimates, despite the fourth-quarter hiccup. In addition, the company has taken its fair share of punishment - and then some ? for lumpiness in its results. Bottom Line: The stock, however, looks cheap, relative to both the company's current financial position and its potential for future growth.