For every Amazon.com (Nasdaq: AMZN) or Priceline (Nasdaq: PCLN), you’ll find many more examples of Web-based business that failed to live up to their promise. 

Companies like WebVan, Pets.com and eToys.com were once worth hundreds of millions of dollars… but failed to survive the eventual dot-com shakeout. Others survived — but are mere shadows of their former selves. 

Case in point: online employment firm Monster Worldwide (NYSE: MWW), which has seen its shares slide more than 90% since their peak in the summer of 2000.

Monster’s market value has fallen to just over $500 million, and in a sign of a clearly missed opportunity, rival LinkedIn (NYSE: LNKD) is worth a hefty $18 billion. That valuation gap may appear warranted. Monster now has just $800 million in annual sales, which have declined every year since 2008. LinkedIn now has more than $1.5 billion in sales and has boosted its top line by more than 50% every year. 

But think about those numbers again for a moment. LinkedIn’s 2013 sales base was nearly twice as large, yet its market value is more than 35 times larger. Monster’s executives surely understand the massive discount being applied to their company’s stock. And they’ve just released a bold game plan to help narrow the valuation gap.

Make no mistake, it will be awfully hard for Monster to catch up to LinkedIn, which is expected to generate $2.8 billion in revenue by next year. But that’s not necessary. Simply returning to double-digit sales growth could send shares of MWW much higher.

To understand how MWW may soon become a surging dot-com stock, let’s cover the highlights of the company’s turnaround plan, which management presented to the investment community last week. 

Monster still has a considerable presence in the online job search market. The company’s various international websites get more than 35 million hits per month and currently offer around 1.5 million job listings. The company’s new plan: Boost that number to 4 million by January 2015.

To build that base of listings, Monster is pulling out all the stops, increasing its social media efforts, adding 125 more direct salespeople to call on major corporate accounts, implementing aggressive pricing strategies, and offering a greater level of analytical tools for HR departments to identify and assess potential candidates.  

If this sounds a lot like the strategies deployed by LinkedIn, you’re right. The fact that Monster waited until 2014 to embrace cloud-based analytics and social media is a bit shocking. It’s as if the company has been stuck in 2008 (when sales peaked at $1.3 billion).

It’s quite unlikely that Monster will ever catch up to LinkedIn. That latter has built an impressive viral growth engine, while Monster has no viral network effect strategy to speak of, but there’s still plenty of room for Monster to grow.

Management was likely disappointed by investors’ reaction to the strategic revamp, which was announced May 14. Shares failed to get much of a bounce and remain well below the 52-week high. 

The tepid reaction may be due to the fact that guidance for the next few quarters is lukewarm. Sales in the June and September quarters are likely to be flat from year-ago levels. (The sale of several divisions, along with a few acquisitions, makes it hard to know what underlying organic growth represents.) 

Analysts have also decided to give the company little credit for this new revamp. They forecast sales will rise just over 2% next year and are taking a wait-and-see approach before adjusting estimates. 

That caution may be warranted due to the company’s legacy of weak growth, but it’s hard to see how sales won’t grow at a much more robust pace if Monster is making all these investments in its platform. Simply looking at the large projected growth in the number of jobs available on its site implies double-digit growth.

So this is a “show me” stock. And while that remains the case, Monster is capitalizing on the weak stock price. Buybacks have helped shrink the share count from 124 million in 2011 to a recent 94 million. Another $54 million remains on the current buyback authorization, which could reduce the share count by an additional 10%. 

Monster’s management is targeting margins of 30% to 35% on EBITDA (earnings before interest, taxes, depreciation and amortization) “in the next 24 months,” according to documents accompanying the strategic presentation. Let’s assume the lower end of the range with EBITDA margins reaching 30% in 2016. 

Let’s also assume that analysts are being too conservative in their sales growth assumptions, and sales can rise 30% to $1.05 billion by 2016 with $315 million in EBITDA. Finally, let’s say this stock will eventually merit an EBITDA multiple amounting to a market value of around $1.8 billion. That’s just a tenth of the market value of LinkedIn, but more than 200% above MWW’s current market value. 

Looked at that way, the prospects of 100% upside for this stock seem quite feasible, even if some of the targets must be ratcheted lower. The improving employment market may also provide a strong tailwind to help Monster achieve these goals. 

Action to Take –>
–Buy MWW at the market price
— Set stop-loss at $4.50
— Set initial price target at $11.25 for a potential 103% gain in 12 months

This article was originally published at ProfitableTrading.com: 
A Gamble on This Forgotten Company Could Double Your Money

P.S. If you think MWW has nowhere to go but up… but would be worth owning at a discount from current levels… then my colleague Michael Vodicka has an income strategy for you. Click here for all the details.