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by adventured 3887 days ago
No it doesn't.

Yelp

2013: -$19m; 2014: -$10m; 2015: $36m

I can keep up with that very modest shift to profitability just fine. For example, a boring chicken company, considered a low growth company, produces faster earnings growth than that and nobody seriously has a hard time valuing them. Nobody would claim you can't value said boring chicken company because their earnings are growing too quickly.

Sanderson Farms (SAFM) net income

2012: $54m; 2013: $130m; 2014: $249m

They're currently trading for six times their last full fiscal year's earnings, and perhaps seven times 2015 earnings. They're growing earnings radically faster than Yelp. Yelp is doing anything but growing earnings too fast to be able to keep up with it.

The idea that you can't value growth companies because things change too much, is nothing more than an attempt to get investors to pay outrageously high multiples for the same earnings they can get elsewhere for far cheaper.
2 comments
jrock08 3887 days ago
Revenue is a much better indicator of growth.

Yelp 2012: 137M; 2013: 232M; 2014: 377M

SAFM 2012: 2.3B 2013: 2.6B 2014: 2.7B

So, SAFM grew ~5% while Yelp grew 100%

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dkrich 3887 days ago
I think that's a pretty huge oversimplification. In terms of dollars, SAFM's growth alone is larger than Yelp's gross revenue. Apart from that, those numbers tell nothing about cost- if Yelp's customer acquisition costs rose more than the revenue, then they are just paying a dollar for $.50. Further, if the social media sector of the market rose 200% overall, then Yelp is actually underperforming the market.

There's not a single "best" indicator of growth. You have to examine multiple facets of a company's performance- revenue, costs, overall market performance, sector performance, etc. to understand a company's growth.

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hugh4 3887 days ago
> The idea that you can't value growth companies because things change too much, is nothing more than an attempt to get investors to pay outrageously high multiples for the same earnings they can get elsewhere for far cheaper.

Not necessarily, I'd say it's a valid principle, but not one that applies to yelp.

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