(MONEY Magazine) – It was only a year ago that investors seemed willing to suspend the rules of fundamental stock analysis entirely when valuing Net stocks. Now the pendulum has swung the other way, and investors are turning to profitability and positive cash flow as the only measures of worth.

So which is best? For now, it seems, a combination of both. In a recent study with Baruch Lev of New York University, Demers concluded that traditional fundamentals do not yet reflect the actual market value of many Net firms, and that some now passe metrics, such as website "page views" and "unique visitors," are still important factors to consider until the industry fully matures. Recently, she spoke with MONEY's Ilana Polyak about what she found.

Q. Why have some analysts been turning away from Web-traffic metrics?

A. Implicitly, analysts were suggesting two things. One, we have more of a financial operating history to look at. And two, they seemed to want something a little bit more tangible, a little bit closer to real dollars rather than eyeballs.

Q. How were analysts using those measures before?

A. In 1999, for example, these were very newly made public companies, and we didn't have any operating history for them. One of the most timely and readily available metrics were these Internet traffic measures, as an indication of both the companies' current performance and their future revenue-generating capacity.

Q. And those measurements still matter?

A. It turns out that metrics like "stickiness" and "reach" are still significant determinants of value, even after the shake-out, although they seem to have been weighted less in the year 2000.

Q. So what can investors take away from your conclusions?

A. I wouldn't make a trading rule on this basis, but it suggests that historical financial statements still don't contain all of the necessary information we need to value an Internet company. So we look at these nonfinancial measures in arriving at an estimated share price.

Q. How long do you expect that to be the case?

A. As long as the accounting rules do not fully incorporate all of the information we need to value a company, then the market will continue to look at nonfinancial indicators as evidence of future profitability.