Lastminute.com, Britain's highest profile dotcom company, yesterday found itself in a fight to defend its accounting as stockbroker Collins Stewart circulated a critical analysis that claimed its shares are "ridiculously overvalued".

A furious Lastminute responded by saying the research was riddled with errors and the broker would be forced to correct them.

Collins Stewart is led by chief executive Terry Smith, whose Accounting for Growth book in the 1980s exposed questionable but legal accounting methods used by public companies.

Mr Smith is not the author of the Lastminute report, but analyst Stephan Kalthof examines many of his areas of interest, including use of provisions after acquisitions, capitalisation of development costs and the detail of cashflow statements.

"We believe we have spotted some real problems for this stock and rate it a clear sell," Mr Kalthof wrote. "It displays all the warning signs of extreme value destruction."

One leading member of the Lastminute board said: "Collins Stewart have not spoken to us and it [the analysis] is full of factual errors.

"They obviously have an obligation to correct the mistakes, but we are fairly cool about it - we have lots of great support from other analysts and it is not as if Collins Stewart is a grade one [investment] house."

The company believes the report has been seized upon by hedge funds, which it thinks are partly responsible for the sharp fall in the company's share price in the last week. The stock, down 3.5% at 236p yesterday, has fallen for six trading days in succession for a cumulative decline of 17.5%.

Lastminute still boasts a market value of almost £700m, despite last month reporting an annual pre-tax profit of only £200,000 after ignoring exceptional items and the amortisation of goodwill.

It called the move into profitability on that definition "an extremely important milestone", and co-founder Martha Lane Fox simultaneously announced she would be stepping down as an executive.

Collins Stewart says: "Even this small profit results from an accounting change; development costs have been capitalised." It also argues that Lastminute's profit has been "bought" via acquisitions and notes that the goodwill charge for the acquisition in March of online car hire firm Holiday Autos appears to have increased by £16.8m to £77.9m.

Mr Kalthof argues that Lastminute's gross profit margins are under pressure, with its strongest source of growth coming in areas where margins are thinnest, such as airline flights. "Call us mad, but we think commission rates above 30% for booking cars are not sustainable."

His final criticism is based on examination of Lastminute's cashflow and net interest statements. He suspects "financial stress" was a motive for the issue of a €103m (£72m) convertible bond in September.