Bankrate (RATE ) is one of a handful of Internet stocks that beat the odds. Under its old name of iLife, it went public before the bubble burst in May, 1999, at 13 a share. The stock promptly crashed -- to 1 in August, 2002. It has since achieved the near-impossible: a rally to 14.29. Bankrate "staged an impressive turnaround and is in the midst of a strong growth cycle," says Charles Trafton of Adams, Harness & Hill, who rates it a buy. Through its Web site, Bankrate lists comparative rate tables and fee info on 100 financial products -- such as mortgages, credit cards, auto loans, and money markets -- from scores of institutions. Revenues come mainly from advertising. The turnaround came after Elisabeth DeMarse took control as CEO in 2000. "I told my staff the first goal was to make money," says DeMarse, who smartly led Bankrate to profitability: It earned 32 cents a share in 2002, vs. losses in 1999, 2000, and 2001. Trafton sees earnings jumping to 52 cents in 2003 and to 60 cents in 2004. DeMarse has streamlined operations and paid off debt. The rebound, says Trafton, boosted gross margins to 70% and operating margins to 23%. A hedge-fund manager who owns shares but asked not to be identified says Bankrate's peers sell at about 38 times 2003 estimates and 25 times 2004 numbers. Bankrate trades at 26 times 2003 estimates and 23 times 2004 forecasts. On July 9, Bankrate was added to the Russell 3000 and 2000 indexes.
Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial