Post a CommentToday I am opening my 8th trade of the year between 2 stocks that trade at similar P/E ratios and have a “somewhat” similar business model. As is always the case you can see the existing live trades here:
http://www.intelligentspeculator.net/livetrades
Let’s start off by looking at the numbers:
| Ticker | Name | Price | PE Ratio | PE Next Year | Return YTD | Sales Growth | Analyst rating | Book Value | Beta | Revenue/Share | Sales 5Y Avg Growth | EPS 5Y Avg Growth |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| TRIP | TripAdvisor Inc | 65.57 | 51.06 | 26.53 | -23.38 | 19.74 | 3.08 | 9.72 | 1.51 | 10.36 | 24.16 | N/A |
| YELP | Yelp Inc | 21.75 | N/A | 26.7 | -26.39 | 45.6 | 3.54 | 9.19 | 1.26 | 7.36 | 59.08 | N/A |
I usually go for the stock that seems to be underpriced relative to its revenue growth but today I’m actually going for TRIP. I don’t believe the revenue comes close to explaining the story going on between the 2. The following Google Trends chart does give a bit more.
Long Tripadvisor (TRIP)
I continue to be a long term believer in TRIP even though the stock has declined quite a bit since my long term speculative pick. Part of it of course is the overall tech sector decline in recent months but there has also been a clear cut between the “sure bets” that have been able to display top and bottom line growth and those that have not been able to tell such a story. TRIP has been a bit slow which I would argue is to be expected given its model. I do like the Instant Booking direction and the fact that several of the most important players (Priceline, Marriott, etc) have now signed up certainly speaks to its long term future. I think that will eventually mean significantly increased revenues per visitor but until that shift happens, TRIP will have trouble outpacing the market.
Next earnings: May 4th 2016
Short Yelp (YELP)
You might have believed that I not that optimistic about TRIP but I’d say that YELP is in similar but worse position. It faces much stronger competition (from the likes of Google, Tripadvisor, Priceline, etc) and I am very skeptical about YELP’s ability to keep up the growth in the next 1-2 years. I’m also less afraid of YELP being acquired than I’ve been in recent years making the risk vs. reward of shorting it better.
Next earnings: April 27th
