Yelp Inc (YELP): Yelping for a Higher Stock Price

TripAdvisor has revenue expected to reach over $935 million this year with a market cap approaching $9 billion. It has been extremely profitable ever since being spun off from Expedia Inc (NASDAQ:EXPE) at the end of 2011. The stock trades at 28 times forward earnings and doesn’t show any signs of slowing down with revenue growing at 20%-plus per year.

Bottom line

While Yelp Inc (NYSE:YELP)’s stock has surged from the start of the year, the comparative analysis with TripAdvisor suggests that stock has years of growth ahead and a decent valuation for investors starting here. Naturally, the company needs to turn consistent profits in order to maintain that revenue multiple. Oddly, if analysts excluded stock-based compensation, as in most growth stocks, Yelp would’ve been slightly profitable in Q1. Most notably, operating cash flows were $250,000, suggesting the company could have an extremely profitable future similar to TripAdvisor as existing markets mature.

Angie’s List provides a compelling valuation if investors believe the membership concept will rule the review world. In the end, the overwhelming amount of content on Yelp Inc (NYSE:YELP) could eventually swamp the limited content from Angie’s, making Yelp the more desirable local site considering the lack of cost for users.

The article Yelping for a Higher Stock Price originally appeared on Fool.com and is written by Mark Holder.

Mark Holder and Stone Fox Capital Advisors, LLC have no positions in any stocks mentioned. The Motley Fool recommends TripAdvisor. The Motley Fool owns shares of TripAdvisor. Mark 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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