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Here we are again looking for a new trade to execute and while taking a look at my stock screener, it now looks like the right time to go short on Valueclick, one of the more important online advertising companies. The major problem with Valueclick is that its technology and properties have fallen behind and are no longer on the cutting edge. Some years ago, Valueclick looked like an attractive target to major players such as Google (GOOG) and Yahoo (YHOO). But I don’t see that as being as likely right now. Valueclick’s sales have been drowning. Here is a quick summary:
Year Annual sales
2007 616.51
2008 455.44
2009 422.72
Scary hey? Of course, because of this, Valueclick trades at a very low P/E ratio but I still consider that it is too high, especially when I compare it with the ratios of Google. Bloomberg estimates that Valueclick’s P/E ratio for next year will be 13.46 while Google’s will be 18.54. Google has been struggling to find high revenue growth (mainly because its revenues come almost exclusively from one source) but when you compare its growth to Valueclick, it looks much more attractive.
While Google has been trying various different strategies to generate new revenues, Valueclick seems content on remaining still. Of course, that is not good enough. With diminishing sales, there are few ways to make profits apart from cutting costs, and you can only do that to a certain extent. To give you an idea, just take a look at the Press Page on Valueclick’s page, there is nothing new in recent months. Compare that to Google which is launching almost one new product or initiative every week and you can understand why Valueclick is falling behind.
Here is a quick comparison of both firms financially:
Price EPS PE Ratio PE next year Return YTF SALES_GROWTH
VCLK 10.12 0.71 12.49383 13.46 0 -7.18
GOOG 581.14 20.62 28.4733 18.54 -6.264713 8.51
Finally, here are the stock charts for both stocks. You can see how Google has now moved above its 50 day moving average and could hopefully break out to the upside. Google’s stock has suffered greatly this year but I am counting on a rebound with hopefully good results in Q2 (to be announced in April).
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