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.