TPS Trade Alert – October 24, 2014
October 24, 2014
Recommendation:
Buy Inuvo (AMEX: INUV) up to $1.65 per share.
Trade Rationale:
Everyone’s heard of Google (GOOGL). Not only is it one of the biggest companies in the world, but the stock has also gone up about 1000% since it went public a decade ago.
The thing is, when you think of anything involving or related to Internet search, you think Google. In fact, the vast majority of Internet searches are done through Google’s simple search page. That’s basically why the company is where it is.
Yes, technically the company does have competition in the search space. Microsoft(MSFT) has Bing for instance. Yahoo (YHOO) has its own search engine. But none of them compare to Google.
Essentially, if you want to invest in an Internet search company, there just aren’t that many choices. Google has most likely bought them up or put them out of business.
Let’s face it… who wants to compete with Google?
Still, there has to be a market out there for small Internet search companies, right? Not everyone wants to use Google after all. Google Ads can be expensive, and the company often changes the rules of the game.
However, there is in fact another choice. And this company fits nicely into our price range (compared to the $500 plus you’d have to spend for just one share of GOOGL).
Introducing Inuvo (AMEX: INUV).
INUV is an Internet marketing and technology company. The company delivers ads to websites and applications, which then reach desktops and mobile devices.
The company operates in two segments. The Partner Network helps owners of websites and applications monetize their properties, mostly through its ValidClick product. Then there’s the Owned and Operated Network. This segment builds and operates websites under the ALOT brand (mostly focusing on local directory listings).
Taken together, INUV products have 3 million users in 26 countries. The websites generate 50 million visitors each month with 20 million clicks. And, the company serves 2 billion ads every month.
This is nowhere near Google territory, but it’s not bad for a small company. Not to mention, this tiny company pulls in $47 million in annual revenue and even turns a profit!
Here’s a closer look…
For the first half of 2014, INUV generated $21 million in revenues. $8.5 million of those revenues came from ALOT sites, a 156% improvement from the same period a year ago.
More importantly, operating profit during the first six months came in at $1.1 million, a massive jump from a loss of $306,000 the year before. Over the same timeframe, net income climbed from just $91,000 to $1.1 million.
Not only is INUV one of the few small, public Internet search/advertising companies, it’s also profitable. That should mean the company has real staying power.
Finally, given the company’s profits, the stock is extremely cheap at current levels.
INUV shares are trading at just 8.9x projected earnings and a miniscule 0.7x sales. Given the company’s ability to generate revenues from multiple sources – and turn them into profits – the stock is clearly a bargain.
Now’s the time to add INUV to your portfolio. We may not get another chance to buy the shares this cheaply.
Remember to use limit orders when placing your trades. And stick to your position sizing rules.
Key Facts:
| Company: | Inuvo |
| Ticker: | INUV |
| Recent Price: | $1.43 |
| Market Cap: | $34 million |
| Avg. Daily Volume: | 380,266 shares |
Chart:
Category: TPS Trade Alert
