Player Avatar codyk500 (82.92) Submitted: 4/25/2013 12:45:22 PM : Underperform Start Price: $19.27 ANGI Score: +94.65

I actually like this company, but I struggle to justify the valuation. Hard to call when the valuation will cave, but as long as there is positive momentum this should rise. The two catalysts to push it down are an earnings call that shows acceleration slowing. Second is a hiccup in the housing market.

My look on valuation:
Enterprise value: $1.1B
Members: 2M
Value per member (current): $559

Reported market penetration: 6.6%
Market penetration in Indianapolis market (most mature, 10+ years): 20%
Potential total market size: 3x what it currently is

Total member potential: 6.1M
EV / total member potential: $184 per member

Revenue per member in mature markets (pre 2003): $156
Revenue per member in mature markets net of marketing: $114

So if we assume they achieve full market penetration and are able to match their mature market revenue per member, this business still trades at 1.2x that revenue per member and 1.6x revenue net of marketing per member. That just seems a little like a stretch.

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