Dow Jones 10444.36 -45.06 10:04 am PST, November 23, 2004  NASDAQ 2072.41 -12.78 For info, visit access.smallcapnetwork.com S & P 500 1172.53 -4.71 Change your subscription status here Russell 2000 620.15 -1.37 VOLUME 04: ISSUE 94  Feature: Getting to the Bottomline. Since we picked up coverage on nifty micro-cap Payment Data Systems (OTCBB: PYDS), (which we like a lot), we've been trolling around looking within the sector to find interesting peers.  Ease of payment processing and cost savings are always in vogue and Bottomline Technologies (NASDAQ: EPAY) could be characterized as a more mature PYDS and, while a great company on its own, profiling smallcap EPAY may give us a look at the potential future of PYDS. Bottomline shares have been doing well of late although stuck in a channel of between $9-$11. Although at the higher end of that range, should the shares breakout, it would be a short trip to test the January 2002 high of north of $13--technically a very good sign. Bottomline provides solutions for financial business management such as collecting payments, sending and receiving invoices, generating business documents and conducting electronic banking.  Boasting over 6000 clients in a diversity of sectors, growth looks good for a company that may appear to the uninformed as boring. As usual, that conclusion would be wrong. Bottomline market caps at about $190 million. Revenues for fiscal 2004 (as at June) were $82 million--up 16 percent over fiscal 2003. Q1 2005 revenues came in at just shy of $22 million. The company has no debt and has $30 million in cash, which represents about $1.55 of the current $10.85 share price. The price to sales ratio is reasonable at just over 2 times against trailing twelve-month revenues. Did I mention no debt? The core of Bottomline's product offerings is its fBPM or financial Business Process Management solution. This software and service package is designed to "streamline paper-driven order-to-cash and purchase-to pay processes - enabling organizations to more effectively manage their financial assets and trading partner relationships". Bottomline (pun intended) is that the company's single source solution is allowing customers to experience greater processing efficiencies and cost savings. The effective processing of receipts, payments, risk management and transaction reporting, if not done on the thinnest dime can hamstring a company's profits and ultimate growth. It appears that Bottomline has already figured this out and is aggressively capturing marketshare. Here's something interesting: a smallcap with decent earnings. Projected numbers for fiscal 2005 and 2006 are 33 and 40 cents a share respectively. Against 2006's number, Bottomline throws off a current projected p/e of 27 times--again very reasonable. Projected revenues could well crack $100 million by 2006. And for those who look at PEG ratios, it is also pretty compelling at 1.5. Investors tend to act like a deer in the headlights when confronted with a stock that isn't Google or Travelzoo or Taser. By the way, we dealt with these stocks in the SCBlog over the last few days and, for our money, there's likely more punch and less risk in names such as Bottomline. There's always risk, but when everyone wants something, both the steak and sizzle are long gone. I'm going to delve more into the phenomena in the SCBlog over the next couple of days. Since it's almost Thanksgiving, drop by before the tryptophan kicks in. You need to be sharp to keep up. Keep an eye on Bottomline. We like the company, the sector and the potential. It's not like buying stuff is going to slow down anytime soon. Neither is the need for the state of the art processes necessary to efficiently and cost-effectively complete the sale(s). Thursday: give a moment of Thanksgiving for the troops and their families. 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