WBSN - Websense

[Palantir]

I hate to do such a short post, when I'd rather post a detailed study on this stock, but I'm short on time (CFA L3!). But I thought I'd throw this idea out there. Small cap, about 500M, with growing revenues and profitability, generates about 70M in FCFE every year. The firm has been buying back significant stock, and has cut share count by about 20%.

 

According to Google Finance:

Websense, Inc. provides employee Internet management products that enable businesses to report and manage how their employees use the Internet. The Company offers software and services designed to improve (and monitor) employee productivity and reduce network bandwidth and storage usage. Companies to monitor and report employee Internet usage, block access to certain content and set time periods for when access is available use its Websense Enterprise software. The Company's Internet Products division develops and publishes WebSense Enterprise, which is an Internet filtering and reporting software system.

 

 

Is anyone knowledgeable enough to comment on this stock, as it seems "too good to be true".

[obtuse_investor]

Just took a quick glance at their balance sheet. It isn't pretty.

 

The book value has been shrinking over last 3 consecutive years. In spite of the share count reduction, even the book value per share has significantly shrunk: 3.61 (2009); 3.21 (2010); 2.62 (2011)

 

Looking at the cash flow statement... The FCF is high, as it should be for a software company. The company generates cash, but the management hasn't figured out how to make it work for the shareholder. They seem to be more interested in issuing options and fattening up their own pocketbook. I'd stay away from this business, even if the FCF yield appears juicy.

 

...my $0.02

 

 

[ItsAValueTrap]

1- The company's estimates suggest flat revenues and profits?

 

2- They are in the enterprise security market and have many competitors.  On a very superficial level, it looks like they might be a second-tier player and don't have the very best software.  Microsoft's Threat Management Gateway (TMG) may be a little better but Microsoft is discontinuing it because they aren't making enough money on it.

 

Fortigate (publicly traded under FTNT) is supposedly a better product.

 

In the long run, I don't think you want to own this company.  You want to own the market leaders or the companies that will become the market leaders (e.g. Fortinet if the valuation was right).  The other companies are prone to shrinking and losing market share.

 

2b- I look around on Ars Technica about what people are saying about Websense:

 

http://arstechnica.com/civis/viewtopic.php?f=10&t=1190166&hilit=websense

 

http://arstechnica.com/civis/viewtopic.php?f=21&t=1188254&hilit=websense

LOL, my first reaction was also "Best Practice for WebSense: Throw it out and get Fortigate."

 

[Palantir]

Thanks for the response guys. Makes sense.

 

 

Admins - feel free to delete this thread.

[ItsAValueTrap]

I think it makes sense to keep threads around.  Somebody else who is screening through a lot of stocks might run the ticker symbol through the forum search and find threads like this.

 

And who knows... if Websense skyrockets, people can always look back at this thread and chuckle.

[Palantir]

 

Fortigate (publicly traded under FTNT) is supposedly a better product.

 

In the long run, I don't think you want to own this company.  You want to own the market leaders or the companies that will become the market leaders (e.g. Fortinet if the valuation was right).  The other companies are prone to shrinking and losing market share.

 

WOW. This is a great call, very fast grwoing. One for the watchlist for sure.