Cheap is as cheap does.

As everyone already knows, the e-tailers have had a miserable few months. Many of their stocks now trade in what analysts politely call the mid-single digits, 70% and 80% off their 52-week highs. At these levels, one would wonder if value managers, most of whom have so far spurned Internet companies, are finally getting in.

Well, not exactly. When it comes to the e-tailers, most value managers still aren't sure there's any value there, even as longtime Internet fans insist this is a chance to pick up some sector leaders on the cheap.

"We can get beyond the lack of a bottom line," says Rick Lawson, manager of

(WEHIX) - Get Report

Weitz Hickory, a mid-cap value fund which has invested in money-losing tech stocks like

Data Transmission Network

(DTLN)

and

Orbital Sciences

(ORB)

. "But you have to ask yourself: If you have a chance to buy this business with the expectation of holding it forever, what is it worth? And

with the e-tailers you're making some pretty heroic assumptions about how the business will develop."

While it's hard enough to get analysts and investors to agree on a way to compare all these companies, some number crunching is illustrative. For all its well-publicized travails,

CDNow

(CDNW)

trades at about 0.7 times sales on a trailing basis.

Musicland Stores

(MLG)

, roughly its off-line equivalent, trades at just 0.1 times sales.

barnesandnoble.com

(BNBN)

trades at 1.2 times sales; plain old

Barnes & Noble

(BKS) - Get Report

trades at 0.4 times sales.

eToys

(ETYS)

trades at 3.6 times sales to

Toys R Us'

(TOY)

0.3.

Amazon.com

(AMZN) - Get Report

, often called the

Wal-Mart

(WMT) - Get Report

of the Internet, trades at 10 times sales to Wal-Mart's 1.5.

Is Cash Really King?

This comparison isn't perfect, since it's on a trailing basis and the e-tailers' appeal was always about their potential for huge growth. But it gives some sense of the premium at which even the most battered e-tailers are trading compared with their landlubber competitors. In addition to ratios like price to earnings (not applicable to the vast majority of e-tailers due to lack of earnings) and price to sales, value investors also look at the amount of cash on a company's books. But even investing in companies that trade at or near their cash-per-share value isn't a no-brainer, explains Randy Befumo, an analyst with the

Legg Mason

funds.

Because so many e-tailers are still guzzling cash, it doesn't make sense to buy them on the basis of their current cash position, but on what their cash will be when they become cash-flow positive, he says. And that time horizon isn't clear. In many cases, it's not even clear whether companies will ever become cash-flow positive, let alone profitable.

Befumo prefers Amazon, with its broad merchandise focus, and a focus on building a brand name instead of competing on price alone. (

(LMVTX) - Get Report

Legg Mason Value Trust got a lot of attention when it invested in Amazon and

America Online

(AOL)

.)

Traditional math has kept many value investors, particularly those adhering to strict investment criteria, out.

Merrill Lynch's

(MABAX) - Get Report

Basic Value,

(MASPX) - Get Report

Special Value and

(MAPNX)

Phoenix funds aren't eyeing e-tailers, says a company spokeswoman. Lauren Cooks Levitan, an analyst with

Robertson Stephens

, says that while investors have bailed on some companies with promising business models, prices still aren't low enough so that value investors are beating down her door. Bill Gerlach, manager of the

MAS Mid-Cap Value

fund, isn't biting. Adds Bill Nygren, manager of the

(OAKMX) - Get Report

Oakmark fund, which adheres to strict value criteria, "My perspective on most of the Internet valuations is that you'd have to move the decimal over one spot before they'd become cheap."

There are exceptions:

Goldman Sachs

analyst Anthony Noto says that for the first time he's been contacted by a number of value investors looking to get into e-tail. Because of the huge drops these stocks have taken, they meet the investing criteria of some value managers, he says.

Established Brands

And while the purest of the pure value managers may be unconvinced, it's not like all value-conscious investors are turning up their noses at the potential of the Internet. Rather, many say they're putting their money behind established brands, which are moving to use the Internet as another sales channel (yes, the over-repeated "bricks-and-clicks" strategy).

While Nygren says he has no desire to bargain-hunt in the pure-play e-tailing sector, he likes companies such as Toys R Us, which he owns. Legg Mason's Befumo prefers

Hollywood Entertainment

(HLYW)

and

Consolidated Stores

(CNS) - Get Report

(which owns most of

KBKids.com

), both of which he owns. All these companies are inexpensive enough to qualify as value plays, but also have Internet businesses.

Analysts, meantime, are talking up familiar names like Amazon,

eBay

(EBAY) - Get Report

and

priceline.com

(PCLN)

.

"These companies have established brand names, sufficient capital, evidence of scalability and a differentiated position," says Goldman's Noto. And because they have a larger institutional ownership, they're not quite as subject to the ebb and flow of hot money as some of the smaller e-tailers (eBay, Amazon and priceline are down a respective 19%, 30% and 33% so far this month compared with far larger drops for other e-tailers). Noto also continues to recommend

Webvan

(WBVN)

and eToys, both of which have fallen more than 40% this month, for their long-term positioning. (His firm has done banking for all of these companies except for Amazon.)

But when it comes to plain-vanilla, single-category e-tailers, it's hard to find anyone getting too excited, even at these lows. Even industry cheerleader

Forrester Research

has changed its tune, predicting that because of weak financials, competition and investor flight, most Internet-only retailers will be out of business by 2001. And with that sentiment gaining a foothold in the markets, even the most downtrodden e-tailers may still look too rich for value investors' blood.