Constant Contact for your 401k

Should you invest in Constant Contact? The stock is still hanging strong at $29 per share. But, as explained in the recent Motley Fool article “Constant Contact’s IPO Blast”, the laws of financial reality don’t play well into its favor.

Constant Contact spends more than 60% of revenue on sales and marketing. But there’s more. After all, the company shells out 23% of revenue on R&D. So it’s no surprise that Constant Contact has been posting losses. For example, there was a net loss of $6 million for the first half of 2007.

Still, Constant Contact is trading at a much higher revenue multiple than is, which is a premier on-demand operator. So while I think Constant Contact has built a solid company, the valuation is too rich for my blood and looks out-of-whack for its sector — where valuations are already frothy. For Foolish investors, having no contact is probably the best policy.

Agreed. The valuation is very rich. At even half the price, they are still riding a valuation that is at a premium to what the rest of the market is seeing.

Message to Exact Target: file your S-1 while bubble-nomics still reign!