Valuation to Increase at WSPI

Tags: wspi, dfs
12 Nov 10:05pm
Posted by ZacksResearch
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Reiterating his bullish case for Website Pros (WSPI), Zacks senior information technology analyst Steve Biggs, CFA explains why the future looks bright for the Web services company:

'Website Pros is a leading provider of web services for small and medium businesses (SMBs). The company uses a factory approach that it can leverage over thousands of customers. The addition of Web.com provides excellent cross-selling opportunities as WSPI can offer its higher-end services to existing Web.com customers.

'Moreover, the acquisition should be accretive in 2008 as it takes out over $5 million in costs. With a falling reliance on Discover (DFS) as a partner, we believe WSPI's valuation should increase.

'Website Pros has generally traded at a fairly attractive valuation, including its current multiple of 18.4x 2008 EPS, and 2.3x 2008 sales. Although this may have been justified in the past, the company has successfully diversified its revenue stream away from Discover, removing one of the biggest risks to the stock.

'The acquisition of Web.com accelerates this diversification and we believe the company will be able to take advantage of cross-selling opportunities. We, therefore, reiterate our Buy rating at a target price of $15.00, which represents a multiple of 24.2x our 2008 EPS estimate and 3.0x our 2008 revenue estimate.'

Read the full analyst report on WSPI.




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