Wednesday, April 04, 2007

A Gold Star for this Growth Stock

These are heady days for Blackboard, the developer of educational software. Earlier this year, the company posted $183 million in 2006 sales, a 35% year-over-year jump. Several hundred of its 800 employees will soon move to a roomier headquarters, a downtown Washington, D.C. building being vacated by the Department of Justice.

Chief executive Michael Chasen, who at age 25 left law school to found the company in 1997, says he’s still keeping entrepreneurs’ hours.

“You’d think that with 800 people, there’d be less for me to do,” he quips. “I was up until two o’clock last night.”

Wall Street has shared in the excitement. Blackboard's stock, up 11% year-to-date, has more than doubled since debuting in 2004. It now goes for a frothy 86 times its consensus earnings forecast for 2007.

If you’re a growth-oriented investor, there’s an argument to jump on the bandwagon. On average, analysts expect Blackboard to increase earnings at a 25% annualized rate over the next three to five years. And while the stock is richly valued, some measures don’t look outrageous. Its price-to-sales multiple of 5.0, for example, stands under an industry aggregate of 5.3 for U.S. software stocks. goes for 10 times its revenues. Google’s sales multiple? 14.

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