Pacific Growth optimistic on Greenfield Online

Includes: HPOL, SRVY
by: David Jackson

Pacific Growth analyst Derek Brown thinks that online market research firm Greenfield Online will trade up after reporting earnings Wednesday. That would make a change. Here's what he says:

We believe that Greenfield Online will post solid Q4:04 results tomorrow after the close... our  Q4 revenue estimate of $13.5M is at the midpoint of Company guidance and matches Street consensus; our $3.3M  adjusted EBITDA forecast is also at the midpoint of guidance and is essentially in line with Street views of $3.2M; and, our PF EPS estimate of $0.12 (or $0.07 on a fully-taxed basis) is slightly below Street consensus of $0.13 and guidance of $0.14 (importantly, management’s EPS guidance does not reflect the dilutive impact of its 12/04 public offering). We  believe the Company experienced strong demand (from existing and new clients) for its Internet survey solutions during  Q4 and that pricing held reasonably firm, suggesting the possibility of incremental upside to results.

Greenfield Online currently trades at 2005 and 2006 EV/Sales ratios of 1.7x and 1.2x our estimates of $70M and $98M,  respectively; pro forma EV/EBITDA ratios of 5.5x and 3.6x our estimates of $22M and $34M, respectively; and, P/E  ratios of 36x and 23x our PF and fully-taxed estimates of $0.49 and $0.75, respectively.  In light of the Company’s recent  history of solid execution, projected 3-year “organic