Homeaway (AWAY) slid 8% in after-hours trading after it reported last quarter’s earnings. Analysts said the reason for the fall was a lower Euro. I think the stock got ahead of itself and isn’t worth 49 times earnings.
Homeaway is a neat company. It lets you rent your house or apartment online, or take a vacation and stay at someone else’s place. Revenue grew 24% last quarter, which is good but not the type of growth expected from a stock with a 49 P/E.
One Year Chart
AWAY was a good stock to purchase earlier in the year when it was in the low $20s. Then the stock spiked on what I believe was hype and a solid stock market. Now AWAY is off its highs, but is still way too high at 49 times earnings.
The thing I am focused on is future profit growth. Sure profits rose 56% last quarter, but notice 2QtrsOut that growth is expected to slow to 14%. In fact profit growth is expected to be 14% for three straight quarters. Fair Value
Homeaway is a growth stock with a unique nitch. I think AWAY is worth 35 times earnings, and is a stock to buy at $21 a share.
Sharek’s Take
Homeaway stock has gone up-up-and-away. Profit growth is expected to slow into the mid-teens and I feel that could bring the stock down around 40%. Also, these estimates just declined and I think this has taken away the stock’s momentum. This isn’t a stock I’d get into around $30, but will be one I will look strongly at if it gets to around $20.
View the Earnings Table here.View the Ten Year Chart here.
