Bought More Shares of TheStreet.com (TSCM)

October 1, 2007 4:03 PM EDT

From Jason Raznick
I originally bought stock in TheStreet.com (NASDAQ: TSCM) back in mid 2005, when it was trading around 4.5 and I recently made another purchase of it earlier this month in the 9 to 10 range.

Every year more and more amateur investors are using the Internet to research their portfolios and TheStreet.com will continue to benefit from that trend. As the amount of pageviews TheStreet.com receives increases, the more advertising revenue it will garner. TSCM hopes to convert some of these habitual free readers into paid subscribers to its premium content. The addition of the well-regarded Kristin Bentz to the Managing Editor of RealMoney will additionally help build out its premium content offering.

TheStreet.com is focusing on providing more content, and specifically, video content. You can see Mr. Cramer in approximately 3 daily videos. Previously, the main advertisers in the video section were financial related companies, such as Ken Fisher\'s Investment Fund. However, it appears that the TheStreet.com TV is beginning to attract more mainstream advertisers like Pfizer\\\'s popular Viagra. Also, in the upcoming months, TSCM is launching a new site called MainStreet.com.

Television
News Corp is launching The Fox Business Channel on October 15th in about 34 million homes to go up against CNBC. News Corp will soon own Dow Jones, owner of MarketWatch and the publisher of the Wall Street Journal. The Fox Business Channel should be able to take advantage of that partnership. Currently, CNBC\\\'s relationship with Dow Jones expires 2012, which brings me back to the TheStreet.com.

Ostensibly, TheStreet.com and Jim Cramer would be a great asset for CNBC to own. It would drastically help in content creation for the daily shows, and also in building out a popular financial web property for CNBC. CNBC has put a lot of money into building out its website, but it is still one of the lowest ranked large financial websites.

Recent acquistions
TSCM bought James Altucher\'s Stockpickr and Corsis\\\' Promotions.com. Numbers were not revealed for the first transaction, but TSCM paid approximately $20.7 million, 2x trailing revenue ($10MM) for Promotions.com. To me, that seems like a great price when many other online advertising companies, such as ValueClick are trading at 4x trailing revenue to as high 14 times revenue.

ePrize, which is the largest competitor in the space that Promotions.com competes, grew its revenue close to 50% to $22.98 million for the first half of \\\'07 and on pace to book over $40 million in revenue for the year. Promotions.com will be accretive to TSCM in the very near future and has the potential to generate a lot of cash flow for it. Not only will it generate cash flow for TheStreet.com, it is a great asset to own if for some reason people became uninterested in reading about the financial markets online. I doubt that is going to happen.

Quick Look at Financials
Enterprise value (ex cash) = $275 million
EBITDA = $13 million
It is trading at approximately 5x trailing revenue.
PE 24, PEG = 1.12, ROE=30%, Short Ratio=13 days. No debt on its books.
On September 18th, Forbes ranked TheStreet.com as one of the five cheapest growth stocks.


I didn\'t invest in the company in hopes that it would get bought out, but rather I like the company\'s outlook and financials. As always, do your research and let me know what you think.

Source: Jason Raznick

DISCLOSURE: I own shares of TSCM and I am a contributor to the TheStreet.com\'s Real Money. I have no position in any other stock mentioned. Not a recommendation to buy or sell any security. For informational and educational purposes only.

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