YELP INC (NYSE:YELP) – A Strong Candidate for GARP Investors

YELP INC (NYSE:YELP) stands out as a compelling pick for investors seeking growth at a reasonable price (GARP). The company, known for its community-driven local business platform, meets key criteria from Peter Lynch’s investment strategy, balancing solid growth with sound financial health and reasonable valuation.

Why YELP Fits the GARP Approach

• Strong Earnings Growth: YELP’s earnings per share (EPS) have grown at an average annual rate of 24.97% over the past five years, comfortably within Lynch’s preferred range of 15-30%. This indicates sustainable expansion without excessive risk.
• Attractive Valuation: With a PEG ratio of 0.70 (below Lynch’s threshold of 1), the stock appears reasonably priced relative to its growth prospects. The P/E ratio of 17.52 is also below the S&P 500 average.
• Healthy Financials: The company carries no debt, a rare strength that underscores financial stability. Its current ratio of 2.89 reflects ample liquidity to cover short-term obligations.
• High Profitability: YELP’s return on equity (ROE) of 19.65% exceeds Lynch’s 15% benchmark, signaling efficient use of shareholder capital.

Fundamental Snapshot

YELP earns a fundamental rating of 7/10, with standout scores in profitability (8/10) and financial health (9/10). Key highlights include:

• Industry-leading margins: Gross margin of 90.88% and operating margin of 12.67% rank in the top quartile of peers.
• Positive cash flow: Consistent operational cash generation over the past five years.
• Shareholder-friendly actions: Reduced share count through buybacks, enhancing per-share metrics.

For a deeper dive, review the full fundamental analysis report.

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Disclaimer

This is not investing advice. The observations here reflect conditions at the time of writing. Always conduct your own research before making investment decisions.