Housevalues Inc.: Get In On the Bottom Floor

In case you haven't already loaded up on enough housing-related plays, Housevalues, Inc. (SOLD) is worth a strong look.

Housevalues provides web services to realtors and operates a number of real-estate related web sites. Their results have dipped along with the real estate market. 4th quarter revenues were down 15% over the previous year; some of that decline was related to their exit of the mortgage business, which failed to reach critical mass.

Revenue was also hurt as SOLD lost some customers, many of which left the bloated real-estate selling business. Overall, the company posted a small loss on the year due primarily to an asset writedown, versus $0.52 in EPS in 2005. Free cash flow remained positive in 2006, at about $0.14/share versus $0.65/share in 2005.

Longer term, the company remains well positioned for growth as the real estate industry migrates to the internet.

SOLD has been aggressively repurchasing shares, buying $11 million worth in 2006. At 12/31/06, the company had $3.12/share in cash net of debt (the stock closed at $5 today), which represents more than 60% of their current market value.

Disclosure: We own shares of Housevalues Inc.

SOLD 1-yr chart:

Comments

[Alan Brochs...:]

I learned about SOLD two years ago, when a Dallas-based hedge fund manager entertained all of us at a dinner one night with the story about this company. I think that this business model, if I understand it correctly, has very few barriers and ultimately doesn't make a lot of sense. The way it was described to me, a person looking to sell a house is assigned to a realtor who subscribes to SOLD (lead generations). The realtor may not have any expertise in the area that the home is located, but that won't stop him or her from trying!

The stock is very cheap, as you point out, on a price/net cash basis or p/b, but is there any value to the company? I would think that they will eat away at that cash horde over time, as they are unlikely to ever become a profitable company. 6 months ago, the street thought they would earn .50 or so this year, now a loss is likely. Revenues are declining (maybe related to exit from mortgage biz???). At any rate, I don't follow this one closely but would appreciate any insight you have regarding the likelihood of future profits.

2007 Mar 28 10:41 AM

[Filmo:]

I concure with Alan. Nothing really there of value. Will probably eat through the cash. As housing goes back to being about the house you live in, instead of an investment to flip every 2 years, the market for their services will collapse. All their sites are merely lead generators.

2007 Mar 28 07:39 PM