IPO watch
Language software firm Rosetta Stone tries a scary market.
(Fortune Magazine) -- If you have been wondering why you're seeing so many TV ads for language teaching software company Rosetta Stone (in one swimming stud Michael Phelps crows about learning Chinese before the Beijing Olympics) three letters explain it: IPO.
The Arlington, VA-based software company is shooting to conduct an initial public offering to price in mid-April. If it falls into the mid range of its proposed share price - $15 to $17 - Rosetta Stone would have a market value of $341 million, and bank proceeds of about $100 million. Rosetta Stone is slated to trade on the NYSE under the ticker RST.
Assuming it goes as planned, it would be just the third public offering this year, after Mead Johnson Nutrition Co (MJN), and Chinese videogame maker Changyou.com (CYOU). A fourth company, education services company Bridgepoint Education, is also shooting for a mid-April IPO.
What all these companies have in common is profitability, and a willingness to take a risk in very volatile public markets. And so far it has been working. Mead Johnson has ticked up slightly since its debut, up 6% overall. Changyou.com soared 44% in its first three days of trading.
Whether Rosetta Stone gets a pop like Changyou depends in large part on the market's mood, but over the long run the software maker has the numbers and growth to warrant a hard look by investors. In 2008, Rosetta Stone booked revenues of $209.4 million, a 52% increase compared to 2007. Plus, it's profitable, with net income of $13.9 million last year, according to SEC filings.
It's hard to find true comps (Berlitz is privately held), but at $16, the stock would trade at a P/E of 23 - not bad for such torrid growth. For investors willing to take the risk, those numbers translate to a buy. 
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