Overstock: Impressive Revenue Growth, But Where Are the Earnings? (OSTK)

| About: Overstock.com, Inc. (OSTK)

Overstock.com Inc. (NASDAQ:OSTK) is a strange company. Not because of the odd activities of its CEO, but because it seems, no matter how high revenue goes, the company cannot make money. Maybe that is why, on a 52-week range of $21.60 to $48.65, it now trades at only $28.50.

Last year is an object lesson. Revenue was up sharply from the year before, going from $494.6 million in 2004 to $803.8 million (according to Yahoo! Finance). And, the company's operating loss actually increases from $4.9 million to $23.8 million. That's very hard to do.

The trend continued for the online retailer as Overstock announced each quarter during last year. Revenue in each of the first three quarters was relatively flat when compared to one another. The range was $150 million to $169 million. Operating loses ran between $3.5 and $9.5 million.

Then, Overstock hit its big Q4 holiday quarter. Revenue jumped to $318 million and gross margins were consistent with past quarter, but expenses rose sharply and the operating loss was $5.4 million.

Overstock's growth in revenue and gross profit has been very impressive, but investors have to ask what the value of the stock is when the company has a big breakout quarter in revenue and can bring none of it to the bottom line.

Wall Street should not focus on the circus around the odd activities of Overstock's CEO and worry about whether the company can every show that it can be profitable. Based on the numbers, it is a very fair question to ask.

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

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