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Dot-Coms: 2 Safer Stocks to Consider

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2. Carbonite (CARB)

Talk about cheap. If you exclude this company's cash balance, its enterprise value (a metric that calculates roughly what a company would be worth in an acquisition) stands at just $160 million, or less than two times projected 2012 sales.

Carbonite offers cloud-based data storage for consumers and small businesses. It's a crowded field with plenty of competition, but the company has built a strong base of more than a million customers that's likely to grow along with the market. Cloud computing is a $1 billion market now and analysts expect it to grow to $2.5 billion by 2014.

Yet investors have fretted that it's hard to gauge this company against its earnings prospects. Carbonite is spending heavily on marketing to build up its customer base, so the company is unlikely to be profitable before 2014. Carbonite's $72 million in cash should help mitigate any concerns of financial troubles.

More important, on a per-customer basis, Carbonite is quite profitable. The company expenses all costs associated with attracting a new subscriber in the early months of a contract, even as revenue is deferred over the life of a contract. This means the company's cash flow should build nicely as the subscriber base matures.
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