Monster Swings For The Fences (MNST)

| About: Monster Worldwide, (MWW)

According to Monster Worldwide (NASD:MSNT), the company's huge employment website, which has the same name as the parent, now has over 46 million resumes and that number grows by 50,000 per day. The company also owns TMP Worldwide, a large recruitment advertising agency, but make no mistake, the online business is king at Monster.

Monster's stock has run like a man with his hair on fire, rising from a 52-week low of $22.44 to around $52 now, and the company has a market capitalization that is, at $6.6 billion, about 6.6 times sales, according to Yahoo!Finance.

What has the company done to deserve such a big move? Revenue has been good for the last three years, rising from $680 million in 2003 to $987 million in 2005. Last year, operating income was $176 million. Nice margins.

The fourth quarter of 2005 was especially strong. Revenue was $267 million and operating income was $53 million. The company's CEO said that international business grew 46% year-over-year. Wall Street rejoiced.

The company gave guidance for $1.165 to $1.215 billion in revenue for 2006 which seems to indicate that revenue growth rates are slowing down.

Monster is expanding in China and the rest of Asia and claims it has the largest share of internet traffic for online job posting sites in Europe.

There is a lot right about Monster, but there are at least a couple of red flags, and those could determine what becomes of the company and its business over the next year or so.

The company CEO owns all of the Class B shares in the company. Along with his holdings of the common, this gives him about 33% of the voting power in the company and de facto control of the board. Since Monster would be an ideal company to be part of a larger internet play, this voting block could be an issue.

More important, Monster is the leader in a business that many, many companies are in and many more want to be. These set up into two classes of competitors. One class has money and traffic, the other class is desperate. Yahoo! (NASD:YHOO) is in the first class and has large online jobs operation. Watch for Google (NASD:GOOG) to get into this business and companies like Craigslist to expand their presence.

The second class of companies are the desperate ones, the newspapers., owned by Gannett (NYSE:GCI), Knight-Ridder (NYSE:KRI) and the Tribune Company (NYSE:TRB) is one of the larger job sites. Dow Jones (NYSE:DJ) and the New York Times (NYSE:NYT) are also in the business as are papers in the U.S. and abroad. These are companies with low stock prices primarily because Wall Street believes that the internet is destroying their businesses. They cannot afford to go gentle into the night.

Both of these principles hold true overseas as well. It is hard to see portal and tradional media companies in Europe and Asia handing this business to Monster without a fight. A big one.

Being in a business where smart, rich companies flank you on one side and rich, desperate companies flank you on the other can make the going tough.

Monster deserves a premium price, but over six times sales is far too high.

MNST 1-yr Chart

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of when it was the 10th most visited site on the internet, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at

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