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 platform connecting users with local businesses, meets key criteria from Peter Lynch’s investment strategy, combining steady growth, strong profitability, and an attractive valuation.

Why YELP Fits the GARP Approach

• Sustainable Growth: YELP’s earnings per share (EPS) have grown at an average annual rate of 24.97% over the past five years, well within Lynch’s preferred range of 15-30%. This suggests consistent, manageable expansion rather than overheated growth.
• Attractive Valuation: With a PEG ratio (past five years) of 0.64, YELP trades below Lynch’s threshold of 1, indicating the stock is reasonably priced relative to its earnings growth.
• Strong Profitability: The company boasts a return on equity (ROE) of 19.65%, exceeding Lynch’s 15% benchmark, reflecting efficient use of shareholder capital.
• Financial Health: YELP has no debt (Debt/Equity of 0) and a current ratio of 2.89, demonstrating ample liquidity to meet short-term obligations.

Fundamental Strengths

Our analysis assigns YELP a fundamental rating of 7/10, highlighting its balance of growth, profitability, and value. Key takeaways include:

• High Margins: Gross margins of 90.88% and improving operating margins signal pricing power and cost efficiency.
• Cash Flow Stability: Positive operating cash flow in each of the past five years underscores financial resilience.
• Undervalued Metrics: YELP trades at a discount to industry peers on forward P/E (11.89) and price-to-free-cash-flow ratios.

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

Our Peter Lynch Strategy screener lists more stocks matching these criteria and is updated daily.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should conduct your own analysis before making investment decisions.