Third-quarter revenue suggests IAC may be your perfect match
It’s a media and Internet company with more than 20 operating businesses and more than 150 brands, which include video site Vimeo.com, Dictionary.com and CollegeHumor.com. It’s also home to the Ask.com search engine, which may be enhanced soon due to IAC’s purchase of About.com’s parent from the New York Times.
In IAC’s recent third quarter, search revenue surged 43 percent, while dating-site revenue popped 35 percent. That quarter was also the fourth in a row in which IAC trounced Wall Street analysts’ expectations. It seems that IAC’s business model is generally resistant to economic downturns.
Customers of Match.com or OkCupid.com who are searching for love are unlikely to reduce spending even if their income levels recede slightly, as is expected with the expiration of the payroll tax holiday. Meanwhile, Wall Street is forecasting IAC’s earnings-per-share growth rate to average about 28 percent over the coming five years. Its dating properties boast more than 1.7 million members.
With a forward-looking price-to-earnings (P/E) ratio of about 10, and with a 2.3 percent dividend yield, IAC seems rather attractive. (Its dividend was doubled in 2012, too.)
Ask the Fool
Q: Where can I look up historical price-to-earnings (P/E) ratios online? – D.L., Columbus, Ind.
A: It’s good to seek out such numbers, because when you compare them with a company’s recent P/E, you can get a rough sense of how overvalued or undervalued it might be. The ycharts.com website will give you several years’ worth of P/E numbers.
Our own website offers companies’ five-year high and low P/Es. To reach them, visit caps.fool.com, enter the ticker symbol in the search box near the top, and on the stock’s main page, click on “Ratios.”
At Morningstar.com, enter the ticker symbol to get to a company’s page, and then click on the “Valuation” tab. You’ll get the current P/E, the average P/E for the company’s industry, the S&P 500’s current P/E and the company’s five-year average P/E. There’s even a “forward” P/E that’s based on expected earnings over the coming year.
Q: Should I want to see a lot of cash on a company’s balance sheet? – C.Y., Miami
A: It depends. When a company has gobs of greenbacks, it can act quickly when opportunities arise. But many successful companies purposefully maintain low cash balances. They use their money to pay dividends, buy back shares (essentially retiring them), and acquire other companies, among other things. If they suddenly need some cash, they draw on lines of credit.
You might be surprised at just how much cash some companies have in their coffers. Recently, for example, Google had more than $48 billion in cash and Microsoft more than $66 billion. General Electric had more than $85 billion. McDonald’s had just $2 billion, though, and Disney less than $4 billion.
My dumbest investment
My dumbest investment was to buy shares of Rambus at its all-time high on margin due to an early morning phone call to my house from a high-pressure “financial adviser” from my full-service brokerage. He told me a court decision was ready to be announced and this baby was set to pop! I was so clueless I gave him the green light, only to see the stock plummet that very same day.
I became pretty mad and woke up to the fact that I needed to take the reins of my financial future. I closed my account and stayed out of the game until I found the Motley Fool and learned more. – B.M., Queretaro, Mexico
The Fool responds: Occasional errors are inevitable, but your story offers several red flags: Be wary of anyone pressuring you to buy an investment, as he or she may be compensated based on that.
Be careful using margin (i.e. borrowing money with which to invest), too, as that can amplify not only your gains but also your losses.