While the company has only been public for a couple of months, the history of the business goes back a few years during which time the company has built up a nearly 60% market share in the U.S. market for web traffic data and analytics. Its primary competitior is NetRatings, with less than 40% of the U.S. market, but ad server firms such as ValueClick (VCLK) (see July note) and aQuantive (AQNT) also provide competition. Still the company has an impressive domestic stable of clients including 85 of the Fortune 1,000 companies, and naming such all-stars as Microsoft (NASDAQ:MSFT), Yahoo (NASDAQ:YHOO), and Google (NASDAQ:GOOG).
SCOR has also begun to expand internationally and while it has decided to focus on the U.S., it recently increased its portion of revenue from overseas to double digits and expects international markets to continue to play an increasing role in the company’s growth. The company has noted several key initiatives to grow its business over the next few years.
Comscore plans to:
Deepen current relationships Grow its customer base Expand its intelligence platform Address emerging media types Expand its technology leadership Build product awareness (through media exposure) Grow internationally
One statistic that points to their success as far as awareness goes is that there were nearly 20,000 citations of the company’s products or services in publications from May 2006 through April 2007. That is a LOT of free publicity.
There are some challenges investors will have to face over the next year. At this point, 66% of the stock is owned by insiders and there is a lockup period restricting those shares. December 26, the lockup begins to expire and this could provide an overhang to the stock price. Also, changing technology may cause difficulty as traditional measures of traffic and clicks may become obsolete as java platforms that automatically refresh pages are harder to quantitatively analyze. Still, the company has a proven track record of innovation and it would be uncharacteristic of them to not adapt with the changing environment.
The stock is not cheap at 26 times consensus 2008 earnings, but Jefferies estimates revenues should grow 26% over the next 5 years. I think it is worth beginning a small position at this level and then adding to it as the picture becomes clearer and a better trading pattern asserts itself. Volume may dry up to give this name less liquidity. If this happens, investors should be careful not to get too deep in the name where it would be difficult to liquidate a position if they are stopped out. Still, the opportunity appears to be attractive given the risk apparent at this time.