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OpenTable, Inc. - Pants Down Dining

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September 18, 2010 – Comments (3) | RELATED TICKERS: OPEN.DL

Stunned! Floored! Amazed! We simply don't know any other way to express how dumbfounded we are, especially since the company is one that we had never heard of.

We are not surprised that the company is one we had never heard of, certainly they have never heard of us either. What we are surprised about is that many investors seem to have forgotten the dot com bubble.

The company is OpenTable, Inc. (Nasdaq: OPEN), a company with a market cap of $1.4 billion that has seen its stock price increase a little more than 263% since the start of the year.

Incredible!

"May we seat your party?"

Basis
OpenTable, Inc. financial information contained in this report is based on the company's most recent SEC Form 10-K filing for year ending December 31, 2009, as filed with the Securities and Exchange Commission on March 11, 2010.

What They Do
The company provides solutions that form an online network connecting reservation-taking restaurants and people who dine at those restaurants. The company solutions include a proprietary Electronic Reservation Book, or ERB, for restaurant customers and www.opentable.com, a popular restaurant reservation website for diners.

The OpenTable network includes approximately 12,000 OpenTable restaurant customers spanning all 50 states as well as select markets outside of the United States. Since the company's inception in 1998, they claim to have seated approximately 130 million diners through OpenTable reservations.

Restaurants pay the company a one-time installation fee for onsite installation and training of their ERB software, a monthly subscription fee for the use of that software and its associated hardware, and a fee for each restaurant guest seated through online reservations. The online restaurant reservation service is free to diners.

The company became a publicly traded company in May 2009.

Short-Term Investment

The stock closed recently at $65.19, with resistance at $67.33, a 3% increase from its recent close, and first support at $50.88, a 22% decline from its recent close.

The stock price has been on a steady climb since February and continues to move higher and higher. With its recent close, the stock price is almost 10% above its 13 day moving average and almost 25% above its 50 day moving average.

Long-Term (5 Year Hold) Investment
It is hard to argue with the much of the company's FY09 financial information as the company is simply to new a public company.

Of the metrics we like to watch, the company's Current Ratio, Quick Ratio, Cash Ratio, Debt to EBITDA Ratio, and Debt to Equity Ratio, were all what we would consider investment grade.

That company has no debt, is also a strong positive.

What was not what we would consider investment grade, was the company's Operating Cash Flow Margin at 22%, the company's Free Cash Flow at $0.40, and the company's Return on Invested Capital at 18%.

Valuations
Based on our review of the company's latest annual financial information, our Reasonable Value Estimate for the stock is $19-$21 per share.

The stock is currently trading at 190 times FY09 Earnings, 161 times FY09 Free Cash Flow, and 20 times Book Value.

Market Advantage
Based on our valuation work for this stock, we believe that the Markets currently have a 334% advantage over the Investor.

Final Thoughts
We admit that we were very impressed with the company's website. Not only were we able to make reservations, we were able to view the menu of the restaurant, as well as read reviews about the restaurant from the company's website.

Additionally, the company's website allowed us to search through various neighborhoods as well as search for various types of cuisine. All very cool indeed.

But considering all of this from the perspective of an investor, we have to wonder if when the main course is served the Caneton de la Saison won't taste an awful lot like L'idiot du Jour.

Wax

Free Worksheet
To download the Wax Ink OpenTable worksheet, please click here.

3 Comments – Post Your Own

#1) On September 19, 2010 at 2:49 PM, TMFBabo (100.00) wrote:

I linked to this post in my latest post.  I figure you won't mind a few extra hits coming over from my blog.

I've always enjoyed your posts, by the way.  

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#2) On September 20, 2010 at 4:20 AM, wax (97.01) wrote:

bullishbabo;

Thanx for the comment and link all you want. The more we all share our thoughts, the better we all become at picking great stocks.

Wax

 

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#3) On September 23, 2010 at 6:18 AM, GraemesPSP (99.50) wrote:

Good analysis

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