Qihoo 360 Technology Co Ltd (NYSE:QIHU)
As you’ll see with many of the companies on this list, few are having any issues with rapid growth. Qihoo, a China-based Web and mobile browsing company, delivered a 59% increase in revenue in the first quarter. Furthermore, Qihoo’s product penetration rate and browser penetration rate stood at 95.8% and 69.6%, respectively. While investors see this as a sign of Internet security dominance, I see it as a sign that little growth potential remains. The downside of big market penetration is that slower growth is likely around the corner, and it tends to attract the attention of bigger companies that want a piece of the action. Add that to the political unpredictability of China and Qihoo’s 91 times cash flow, and I have all the reasons I need to keep my distance.
Source: Sheila Scarborough, Flickr.
LinkedIn
My nightmare hath returned for a fourth go-round! In all three instances previously, I’ve harped on LinkedIn Corp (NYSE:LNKD)’s valuation and slowing growth, and it’s proven me wrong in each instance. That’s bad news for me but great news for my Foolish colleagues who’ve correctly called LinkedIn’s upside. Unfortunately, the primary culprit, its valuation, is still what causes me to distrust the stock here. LinkedIn Corp (NYSE:LNKD) is largely dependent on the jobs market and a growing economy for its business to thrive. The end of QE3 could put a serious crimp on lending and trickle its way throughout the economy all the way down to the jobs market, where it could cause hiring to stall. With so many economic questions, I can’t justify paying 68 times forward earnings for a company so intricately tied to the fate of the jobs market.
Tripadvisor Inc (NASDAQ:TRIP)
Last, but certainly not least, is online travel media review, information, and planning provider TripAdvisor. Working in the company’s favor is the fact that few people are willing to give up their vacations even if consumer spending is tightening. However, that view is based on continued growth in China, whose demand has at least partially propped up a fragile U.S. economy. With China’s potential credit crunch threatening to slow its GDP growth even further, Europe installing austerity measures across numerous countries, and the Federal Reserve ready to pull the plug on QE3 in the U.S., we could be looking at a serious global slowdown. That’s bad news for TripAdvisor, which generates 78% of its revenue from ads, which are growth driven.
Foolish roundup
There you have it: the fourth installment of my overvaluation index! Will I go four-for-four? Only time will tell, but, as always, I highly doubt these valuations can hold up against the S&P 500.
The article 5 Stocks You Can Sell Right Now originally appeared on Fool.com.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article.
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