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November 09, 2005

An IPO That Might Print You Some Money

Tim Mullaney

This hasn’t been much of a year for tech or Internet IPOs – certainly nothing like a 2004 powered by Google and populated with other winners like Salesforce.com, Blackboard and Blue Nile – but today’s news brings one deal that’s worth a look. I met two weeks back with Robert Keane, the CEO of VistaPrint Inc (VPRT) – and there’s a lot to like. Today (Nov. 9) the first research reports came out on this company, which went public Sept. 29. The reports, like the company, are worth a look.

First of all, the Internet companies that do best over the long haul disrupt other people’s businesses by changing their economics. VistaPrint does this in spades. The Bermuda-based commercial printer, which gets 90% of its sales from the small-office/home office market (meaning, companies with 10 or fewer workers) works on gross margins of 60% or better, compared to the 22% CHECK that’s standard in the industry. They have a cool Web site, naturally, but the more important innovation is new presses that allow them to economically juggle thousands of small orders and deliver them more cheaply than commercial printers of yore. Software that VistaPrint developed lets them jam hundreds of different jobs onto a single 41” press sheet, according to a report in the trade journal PrintAction Online. (Thanks guys! I spent an hour with Keane and he didn’t explain VistaPrint’s protectable competitive advantage as easily as you did in a sentence). They spend less than a minute of labor setting up each order, and can run up to 10,000 unique jobs a day at each of VistaPrint’s two printing plants. “VistaPrint is working proof of how a printer can profit and grow by taking advantage of computer-integrated manufacturing,” Paul Tasker, general manager for printing-press supplier MAN Roland Canada, said in a PrintAction interview in September.

Profits? Check. VistaPrint made $2.9 million in the September quarter, the first of its 2006 fiscal year, on $28.9 million in revenue. Goldman Sachs analyst Anthony Noto estimates that VistaPrint will make 30% margins on incremental business, so profits should spike nicely. (Disclosure: Goldman ran VistaPrint’s offering). He sees profits growing 20% a year through 2010. Noto says that at $22 a share, up from $18.40 today, VistaPrint would command only about 17 times fiscal 2007 earnings before depreciation, interest, taxes and amortization. That’s well below other Web companies, and Noto’s forecast assumes VistaPrint’s growth slows sharply from its recent pace. Again, worth a look.

06:12 PM


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