With shares of IAC/InterActiveCorp (NASDAQ:IACI) trading at around $49.78, is IACI an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
C = Catalyst for the Stock’s Movement
IAC was written about in our newsletter on March 8, 2013 and rated an OUTPERFORM. At that time, the stock was trading at $43.57. Therefore, it would have been a good investment. However, is that still the case today?
IAC impressed last quarter with a year-over-year revenue increase of 15.90 percent, and a year-over-year earnings increase of 55.60 percent. On a larger scale, revenue has consistently improved on an annual basis, and earnings have made tremendous improvements since 2008 and 2009. Earnings did drop in 2012, but this shouldn’t be cause for concern. IAC is in a much better place than it was several years ago. It’s now more strategic when it comes to acquisitions and capital allocation.
IAC is trading at 26 times earnings, which is higher than the industry average of 22 times earnings. However, margins are respectable. Profit margin is 6.15 percent, and operating margin is 12.19 percent. IAC does yield 1.90 percent, which is a nice bonus, especially considering peers like AOL (NYSE:AOL) and Yahoo! (NASDAQ:YHOO) don’t offer any yield.
IAC does have an 8.80 percent short position. This doesn’t add up considering the fundamentals. However, this isn’t the type of stock that would hold up well if the market were to falter. Many bears out there are shorting expensive stocks in anticipation of a market correction. It’s not likely that the majority of these shorts are going after IAC for other reasons. After all, IAC has delivered consistent profits, top-line growth is good on an annual basis, the brand portfolio is highly diversified, monetization methods are effective, the balance sheet is healthy, there is international growth potential, and the Internet is still growing in regards to popularity. Furthermore, analysts like the stock: 14 Buy, 3 Hold, 1 Underperform.
The company culture at IAC is subpar. According to Glassdoor.com, employees have rated their employer a 2.9 of 5, and only 49 percent of employees would recommend the company to a friend. That said, there is an enormous disconnect here. Despite those poor numbers, an impressive 86 percent of employees approve of CEO Greg Blatt. It looks as though leadership is good, but there are problems on lower management levels.
Now for the fun part. Let’s see how well some of IAC’s sites are performing.
The information below is based on stats from Alexa.com.
Ask.com
Global Rank: 27
U.S. Rank: 19
Pageviews-Per-User (past three months): Up 13.7 percent
Time-On-Site: Up 5 percent
Bounce Rate (only one pageview per visit): Down 2 percent
About.com
Global Rank: 85
U.S. Rank: 36
Pageviews-Per-User (past three months): Down 0.87 percent
Time-On-Site: Down 3 percent
Bounce Rate (only one pageview per visit): Up 1 percent
OKCupid.com
Global Rank: 693
U.S. Rank: 189
Pageviews-Per-User (past three months): Down 0.96 percent
Time-On-Site: Down 2 percent
Bounce Rate (only one pageview per visit): Up 16 percent
Tutor.com
Global Rank: 88,437
U.S. Rank: 23,898
Pageviews-Per-User (past three months): Up 9 percent
Time-On-Site: Down 5 percent
Bounce Rate (only one pageview per visit): Down 6 percent
CollegeHumor.com
Global Rank: 3,309
U.S. Rank: 1,458
Pageviews-Per-User (past three months): Down 13.87 percent
Time-On-Site: Down 11 percent
Bounce Rate (only one pageview per visit): Up 12 percent
CitySearch.com
Global Rank: 3,507
U.S. Rank: 1,002
Pageviews-Per-User (past three months): Up 8.0 percent
Time-On-Site: Up 8 percent
Bounce Rate (only one pageview per visit): Down 3 percent
Urbanspoon.com
Global Rank: 2,155
U.S. Rank: 636
Pageviews-Per-User (past three months): Down 0.89 percent
Time-On-Site: Even
Bounce Rate (only one pageview per visit): Up 1 percent
DailyBurn.com
Global Rank: 28,115
U.S. Rank: 8,666
Pageviews-Per-User (past three months): Down 8.79 percent
Time-On-Site: Down 8 percent
Bounce Rate (only one pageview per visit): Down 2 percent
Chemistry.com
Global Rank: 7,648
U.S. Rank: 1,371
Pageviews-Per-User (past three months): Up 19 percent
Time-On-Site: Up 9 percent
Bounce Rate (only one pageview per visit): Up 9 percent
Vimeo.com
Global Rank: 140
U.S. Rank: 112
Pageviews-Per-User (past three months): Down 2.19 percent
Time-On-Site: Down 3 percent
Bounce Rate (only one pageview per visit): Up 3 percent
Match.com
Global Rank: 356
U.S. Rank: 92
Pageviews-Per-User (past three months): Down 7.09 percent
Time-On-Site: Down 8 percent
Bounce Rate (only one pageview per visit): Up 11 percent
Shoebuy.com
Global Rank: 6,700
U.S. Rank: 1,481
Pageviews-Per-User (past three months): Down 1.31 percent
Time-On-Site: Down 4 percent
Bounce Rate (only one pageview per visit): Up 3 percent
Overall, website performance is average. There haven’t been many significant changes in either direction.
Let’s take a look at some more important numbers prior to forming an opinion on this stock.
T = Technicals Are Strong
IAC has performed well over the past three years. Is this trend likely to continue?
| 1 Month | Year-To-Date | 1 Year | 3 Year | |
| IACI | 2.34% | 6.49% | 13.73% | 120.4% |
| AOL | -9.98% | 18.74% | 52.01% | 94.07% |
| YHOO | -1.60% | 32.66% | 72.55% | 72.66% |
At $49.78, IAC is trading above its averages.
| 50-Day SMA | 48.95 |
| 200-Day SMA | 45.04 |
E = Equity to Debt Ratio Is Normal
The debt-to-equity ratio for IAC is normal. Debt isn’t a concern.
| Debt-To-Equity | Cash | Long-Term Debt | |
| IACI | 0.33 | 679.57M | 580.00M |
| AOL | 0.05 | 467.80M | 104.20M |
| YHOO | 0.00 | 3.01B | 36.00M |
E = Earnings Have Been Steady
Earnings have substantially improved over the past several years. However, there was a slight setback in 2012. Revenue has improved over the past three years.
| Fiscal Year | 2008 | 2009 | 2010 | 2011 | 2012 |
| Revenue ($) in millions | 1,445 | 1,376 | 1,637 | 2,059 | 2,801 |
| Diluted EPS ($) | -1.09 | -7.06 | 0.94 | 1.85 | 1.71 |
Looking at the last quarter on a year-over-year basis, revenue and earnings improved.
| Quarter | Mar. 31, 2012 | Jun. 30, 2012 | Sep. 30, 2012 | Dec. 31, 2012 | Mar. 31, 2013 |
| Revenue ($) in millions | 640.60 | 680.61 | 714.47 | 765.25 | 742.25 |
| Diluted EPS ($) | 0.38 | 0.47 | 0.43 | 0.43 | 0.61 |
Now let’s take a look at the next page for the Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?
Conclusion
IAC isn’t the most loved company on the street, which is evidenced by that 8.80 percent short position. However, IAC continues to deliver on the top and bottom lines. As long as that remains to be the case, IAC is an OUTPERFORM.
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All content posted should not be considered professional advice. Please do your own research and consult with a professional financial advisor before making any investment decisions. I don’t have any positions in this stock.
Read the original article from The Cheat Sheet