HomeAway -- a leading online marketplace of vacation rentals worldwide -- is an interesting business that, at first glance, looks pricey with a P/S of 8.3 and a trailing P/E of 188. On a P/FCF basis, however, HomeAway looks much more reasonable trading at a multiple just over 30. Here are a few other factors that give me optimism about the company over the next several years:
** As of the most recent quarter, sales and adjusted EBITDA are expanding at more than 30% year-over-year.
** The company just crossed 1 million paid listings on its vacation rentals platform, of which 72% were subscription listings paid in advance by property owners. Currently the company’s renewal rate is hovering between 72%-73%.
** Over the past four quarters HomeAway’s core business produced $109 million in free cash flow, providing ample fuel to strengthen the company’s balance sheet, make acquisitions, and continue to invest in the business for future growth.
** The company has $792.5 million in cash and short-term investments and $307.4 million in long-term debt, making for a healthy net cash position of $485.1 million.
** Superb Glassdoor ratings and management. Cofounder and CEO Brian Sharples receives a stellar 94% employee approval rating, with employees rating the company 4.1/5 as a whole. 79% of employees would recommend the company to a friend. Fellow HomeAway cofounder Carl Shepherd remains on board as chief strategy & development officer.
** Growth trajectory in the coming years. HomeAway just created a chief marketing position which will be staffed by Mariano Dima, who brings years of experience from Visa Europe, PepsiCo Latin America, Levi Strauss, and Vodafone. HomeAway has spent the past several years investing in and building its technology and platform, and now the company is placing its efforts behind a new marketing push starting in the remaining months of 2014. This should help drive growth over the next several years.
** Paid listings and visits to HomeAway’s websites continue to grow very quickly. In the most recent quarter (2Q 2014), paid listings increased 34.2% year-over-year while HomeAway’s websites saw a 14.2% year-over-year increase in visits to 229.5 million during the quarter.
Brian Sharples explains that HomeAway’s vision is "to make booking a vacation rental as easy as booking a hotel." Given the company’s success in building a leadership position in the market, coupled with a new marketing strategy that should serve as fuel to propel growth in the coming years, I think we will see HomeAway outperform the market over the next 3-5 years. Visionary and dedicated leadership, a market-leading business, vibrant employee culture, and strong free cash flow production go a long way in my book.
Here are more of my thoughts on HomeAway's 2Q 2014 earnings report and the outlook of the company: http://www.fool.com/investing/general/2014/07/29/homeaway-co...
David K [more]