Homeaway (AWAY) is a recent IPO and the stock has been a good one so far in 2013, rising from $22 to $30 for a gain of around 36% (rounding). Homeaway is a marketplace that let’s people rent apartments by the day. Want to travel to NYC but would prefer to stay in an apartment instead of a hotel? Go on homeaway.com and see what’s available. The prices are reasonable and you get to live in a furnished apartment — most with stove and refrigerator. You might be able to fit the whole family in one place for the price of one hotel room. Everybody wins.
Homeaway’s concept is good, but the stock is really overvalued. Sales growth was only 22% last quarter, so I wouldn’t say this company is rapidly growing. Also, profit growth in 2013 is expected to be 33%, which shouldn’t support a 48 P/E. Still, the concept is good and if AWAY gets to be a good price, we might want to take a flyer on it.
One Year Chart
You can see the stock’s done well the past few months, but that 100% profit growth figure from last quarter isn’t soundproof. AWAY’s financials are difficult to read, with many different opinions on what AWAY made. For instance, depending on where I got my figures, last quarter’s profit growth was either 27% or 100%. I didn’t like having to choose, but went with what I thought was the most honest answer.
Another financial question is how much did AWAY make in 2011? Some sources have $0.70, some have $0.37. The annual report has a loss of $0.31. This is all confusing, I wish these numbers were solid. The 2011 profit is a big deal because if the company made $0.70 that year, and it is expected to make $0.64 this year, that’s moving backwards.
Back to the one year chart, profit growth looks good the next two quarters. But one thing I don’t like is annual profit estimates declined a bit this quarter. That’s now what you want to see from a high-flying stock. I don’t think AWAY has the fundamentals to support a 48 P/E. This stock is all hyped up.
Fair Value
I’m putting my Fair Value at 35 times earnings. The stock needs to come back down to the low $20s. Even then its only fairly valued, so its not a deal until it gets to the teens.
Sharek’s Take
Homeaways has a good concept, but the company isn’t really growing like gangbusters. It also isn’t whipping earnings estimates or even upping them. This stock is hot but those who do their research can tell the stock’s overpriced. Wait till AWAY moves away $30 before getting in. I’ll have this stock on my radar, and will look at it in the low $20s.
View the Earnings Table here.View the Ten Year Chart here.
