"We think WebTrends is an undiscovered gem," says Rob Owens, senior analyst at Pacific Crest Securities, based in Portland, Ore. "WebTrends is a leader in providing meaningful metrics to Internet sites. The company is capitalizing on the growth of the Internet in general and e-commerce in particular."

Owens has a "strong buy" rating on the stock with a 12-month price target of $75.

Portland, Ore.-based WebTrends was founded in 1993. The company’s services help Web-site operators improve their online offerings through a variety of traffic-analysis tools, such as determining page-hit counts, the length of time individual users spend on a site, where they’re coming from, how much bandwidth they have, and which Web pages might be inducing visitors to depart.

"Without a product that can look at things like that, you’re just flying blind," says Glen Boyd, WebTrends president and chief technology officer, at a recent industry symposium in San Francisco.

WebTrends went public last February at $13 a share and quickly moved up to a high of $84 before post-initial public offering profit-taking took hold. More recently, the stock has been bobbing around in the $60 to $70 range.

Although it has fared well since its IPO, WebTrends’s stock hasn’t skyrocketed like some other well-known Internet infrastructure stocks, such as Broadvision Inc. {BVSN} and Vignette Corp. {VIGN}

Broadvision 52-week performance

Vignette 52-week performance

"Internet-infrastructure tool companies that do content management, such as Broadvision and Vignette, garnered a premium early on and continue to hold that edge," says Jennifer Jordan, an analyst at Black & Co., based in Portland, Ore. "But if you ask me, WebTrends is one of my favorite companies in my whole group. They’re one of the few Web companies that are bringing money to the bottom line."

Jordan has a "buy" rating on the stock, with a six-month price target of between $84 and $85.

On Oct. 18, WebTrends reported third-quarter net income of $878,000 on revenue of $5.3 million, as compared with net income of $51,800 on sales of $2.1 million for the same period a year earlier.

"The company is almost held in some modest disdain because they are actually profitable," says Paul Saunders, an analyst at San Francisco-based SoundView Financial Group, which helped take the company public.

Saunders has a "strong buy" rating on the stock, which has already blown by his initial $50 price target.

Saunders says the higher targets set by other analysts are "certainly not outside the realm of possibility. We’re not changing our target because its problematic in this market. It doesn’t pay to estimate valuation anymore."

Analysts say WebTrends will benefit from surging demand for the hardware that drives sales of the company’s products. In 1998, about 1.3 million Web servers were sold, generating about $13 billion in revenue. Those numbers are expected to increase to 5 million units sold, or a dollar volume of $38 billion, by 2002, according to the Gartner Group, based in San Jose, Calif. According to a recent survey by the trade journal InterActive Week, WebTrends holds a 46 percent market share for Web-site traffic analysis on servers.

WebTrends’ closest competitor is Fremont, Calif.-based Accrue Software Inc. {ACRU}, which primarily targets large Web sites with a more expensive suite of products.

Accrue Software post-IPO stock performance

John Powers, an analyst at Banc Boston Robertson Stephens, based in San Francisco, says WebTrends is positioned to be a chief beneficiary of the growing complexity of the Web. "It’s pretty obvious," he says. "The vast spending building out Web sites has taken place with a fairly small amount going to see if the money is being spent wisely."

Zona Research, based in Redwood City, Calif., for example, estimates that $4.4 billion is lost each year due to poor Web-site performance.

"WebTrends helps sites customize what they’re doing and make sure they’re getting it right," says Powers, who rates the stock "buy."

"We’re very optimistic about WebTrends," adds Stephen Sigmond, an analyst at Dain Rauscher & Wessels, who recently set a 12-to-18 month price target of $75 for the stock.

Sigmond says WebTrends looks like a good bet because of the way the company is augmenting its product line to better serve customer needs. By analyzing bandwidth-usage patterns, for example, WebTrends helped one customer save $800 a month after determining that an employee had inadvertently left a real audio connection up and running 24 hours a day, though he thought he had turned it off.

"It’s good news from a stock perspective anytime you see a company taking on a larger share of their customers’ needs," Sigmond says.

Increased spending for online advertising is also boosting WebTrends’ fortunes. Overall spending on online advertising is projected to grow to $7.7 billion by 2002, up from $1.9 billion last year, according to Jupiter Research, based in New York. WebTrends cashes in on that growth by helping advertisers determine which of their ads are paying off.

"There’s lots of room for growth," Jordan says. "You have the new dot-coms and all the old companies getting online who need to know if what they’re doing is working."

Analysts say WebTrends’ next few quarters could be particularly lucrative, driven by fallout from the holiday shopping season.

"It’s going to benefit them, definitely," Powers says. "As e-tailers get into the next quarter they’re going to want to find out what they’ve done right or wrong."

"When you look at what is going on online, there’s a lot of momentum for WebTrends," Owens says.

More than half of Fortune 500 companies are WebTrends customers, according to information provided by the company. All told, the company has more than 31,500 customers.