The odd story of Pacific Webworks (ticker PWEB) took another turn a couple weeks ago when a judge threw out Google’s claim that the company was behind those incessant “earn money from Google working from home” scams you see all over the internet. Now that they have this monkey off their back, they’re trading at a 1.02x trailing earnings.

I first became of PWEB when I noticed that one of the Sprott funds had taken a position in them, and then dumped that position, possibly in light of the charges from Google that they were involved in the “work from home scams“. Now that that lawsuit has been dismissed “with prejudice”, are we looking at a ridiculously undervalued company now?

Last year they earned 10 cents a share, this quarter they earned 1 cent a share. In 2008 they earned about $400,000 in revenues, then in 2009 it went up over $4 million, and now they seem back on track to earn another $400,000 again. So, one asks, what the hell is going on?

According to their president discussing events:

“Additionally, we continue to develop our marketing strategies to meet current market demands. During 2010, as we go through this transition, our revenues may decrease when compared to 2009, but with increased profit margins. Revenue growth will likely commence later this year or early 2011. The company remains excited about the future and anticipates a profitable first quarter 2010.”

Reading between the lines, I wonder aloud if PWEB had the misfortune of being the web hosting provider of choice of the Google scammers, their revenues exploded (these websites were all over the place) – then being the only “real” business Google could trace things back to, got hit with the lawsuit.

What happened then? Did they boot the Google scammers (good on them), and take the revenue hit, and move on?

Even at these reduced revenue levels, the company still appears profitable and if normalized out the last quarter’s earnings pencils out to 4 cents a share putting them at a multiple just under 3.

I have no position in PWEB but I’m going to be looking into it some more. This could be a classic case of a bad-news story which has overreacted to the downside (or not – still a lot more to learn).