Taking Stock Of This Fallen Angel

With that in mind, we believe any positive operating comments made by management could serve as a near-term catalyst for the stock price. The company turned in an operating profit of $2.4 million for its fiscal first quarter ended Oct. 31. On a non-GAAP basis that excludes the impact of non-cash charges and restructuring activities, that number would have been $9 million, a 385% year-over-year jump. We expect some synergistic benefits from Modus to improve profitability going forward.

While it's no longer a household name, CMGI still has a $1 billion market cap, a sizable core operating business and will likely turn in an operating profit over the next 12 months. After backing out the cash, the company is valued at $810 million in the market, less than 1 times its $1 billion sales target. We believe the stock will trade closer to its sales level in the coming months, implying 25% upside or a share price of $2.65 a share. Investors who are willing to look beyond the company's historic collapse and focus on the inherent value of the business could take advantage of an attractive opportunity.

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