The media and Internet company with consistent cash-generating ability
IAC/InterActiveCorp (NASDAQ:IACI), is the owner of several websites including Ask.com, HomeAdvisor.com and About.com. The majority of its revenue, $1.46 billion, or 52% of the total revenue, was generated from the Search & Applications segment. The Match segment ranked second with $713.5 million in revenue. Those two segments were also the two largest profit contributors, with $305.6 million and $205.5 million, respectively, in operating profits.
IAC/InterActiveCorp (NASDAQ:IACI) has not only been growing quite consistently for the past five years. It is also the cash cow. For the past five years, its operating cash flow has fluctuated in the range of $328 million to $374 million while the free cash flow stayed in the range of $290 million to $332 million. IAC/InterActiveCorp (NASDAQ:IACI) is trading at around $51 per share, with the total market cap of $4.3 billion. The market does not value IAC/InterActiveCorp (NASDAQ:IACI) cheaply, at 9.3 times EV/EBITDA.
Compared to its famous peer, AOL, Inc. (NYSE:AOL), IAC has a much higher enterprise-value multiple. AOL, at $37 per share, is worth around $2.8 billion on the market. The market values AOL, Inc. (NYSE:AOL) at only 5.5 times EV/EBITDA. However, if the potential growth is taken into consideration, AOL, Inc. (NYSE:AOL) seems to be more expensive with a higher PEG ratio at 1.67 while IAC is valued at only 0.41 PEG.
Recently, the company’s premium video platform, AOL, Inc. (NYSE:AOL) On Network just released a new global branded video content offering, which is called: Be On. Be On let marketers get access to the company’s two HD studios to develop premium videos and get them syndicated in the AOL, Inc. (NYSE:AOL) On Network, which had more than 724 million video views each month.
AOL, Inc. (NYSE:AOL) only pays shareholders a special dividend of $5.15 per share at the end of 2012, and now it has stopped paying any dividends. In contrast, IAC offers investors the dividend yield at 1.9%. Interestingly, the payout ratio is not quite high, at a reasonable rate at 43%.
My Foolish take
Einhorn might like IAC/InterActiveCorp (NASDAQ:IACI) because of its consistent cash flow generating capabilities and Spirit AeroSystems Holdings, Inc. (NYSE:SPR) due to its leading position in quite an interesting niche aerospace market. If potential growth was factored in, both companies seem cheap, with their PEG ratios are less than 1. Looking forward, I think both companies could deliver decent returns for long-term shareholders.
The article Two of David Einhorn’s Newest Buys originally appeared on Fool.com is written by Anh HOANG.
Anh HOANG has no position in any stocks mentioned. The Motley Fool recommends Spirit AeroSystems Holdings. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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