This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

October 22, 2010 - Ariba, Inc. (ARBA-NASDAQ) together with its subsidiaries, provides spend management solutions in the United States. It offers Ariba Spend Management solutions to deploy and integrate with enterprise resource planning and other software systems. These solutions allow organizations to automate tasks, such as identifying global suppliers, sourcing goods and services, negotiating and managing contracts, processing invoices and payments, and managing trading relationships.

Ariba is hot. Since the bottom of the market in early 2009, it's ahead by 200%, fueled by earnings. This year, 14 analysts see 76 cents a share, up from 71 cents in 2009. Next year, they should jump by 14.5% to 87 cents a share. Look for fourth quarter earnings (fiscal year ends September 30) to be 20 cents compared to 18 cents last year. For the first period, expect 20 cents vs 19 cents in the first quarter of this year.

For the next 5 years, analysts see earnings growing an average of 17.50% a year compared to 20.92% a year in the last 5. Revenues should grow by 7.8%. They're currently running at an annual rate of $360 million. Expect $386.19 million next year. International sales were 30% of fiscal 2009 total revenues.

The growth comes from companies needing to keep close track of their spending habits. Hence, the popularity of Ariba's Spend Management software and services. Analysts only see greater demand for this sector of Ariba's business as the software lets businesses of any size automate procurement processes and identify cost-savings opportunities. While sales continue to ramp, management is focused on cutting operating costs which will improve margins and earnings.

Ariba was busy buying companies earlier in the decade. It purchased companies like FreeMarkets in 2004, Allient in 2004, Supplier-Market in 2000, Tradex Technologies in 2000, TradingDynamics in 2000. It now is growing more internally with a sharper focus on its product lines.

The balance sheet is enviable. There's no debt. There's $187 million in cash or $2.14 a share. Current ratio is 1.22. It needs this financial flexibility to compete in a very competitive market. Two of its competitors are Oracle and SAP. Funds can be used for substantial Research and Development projects, a necessity if the company is to introduce new products and services. Or management could look to acquire again.

More numbers: Price to sales ratio is 4.78. Price to book is 3.49. Operating margin for the last 12 months was 5.88% and Profit margin was 5.10%. Return on equity was 3.98% and Return on assets was 1.89%. Book value per share is $5.49. In the last 52 weeks, the stock is up 54%. The 52-week high was reached on October 5 at $19.65. The 52-week low was $18.29 on December 9, 2009. There are 87.34 million shares outstanding with a Float of 86.85 million. Insiders own .24% of the stock. Institutions own 87.50% of the Float. There is no dividend.

This stock seems to be fully valued, if not a little more than fully. But the stock price has momentum. Just look at its price chart. How long that upward price can continue is a good question. There's a lot of good about this company, and its future seems very bright as businesses need to keep close track of spending. This stock is for more aggressive investors looking for a momentum play.

- Company Web site: www.ariba.com

- Ted Allrich