YELP INC (NYSE:YELP) – A Strong Candidate for Long-Term Growth at a Reasonable Price

YELP INC (NYSE:YELP) stands out as a potential fit for investors seeking long-term growth at a reasonable price (GARP). The company, known for its community-driven platform connecting users with local businesses, meets several key criteria from Peter Lynch’s investment strategy, including strong profitability, manageable growth, and an attractive valuation.

Why YELP Fits the GARP Approach

• Earnings Growth: YELP has delivered an impressive 5-year average EPS growth of 24.97%, well above the 15% minimum threshold in Lynch’s strategy. This indicates sustained profitability without excessive growth that could be unsustainable.
• Reasonable Valuation: The stock’s PEG ratio (past 5 years) is 0.65, below the critical threshold of 1, suggesting the stock is undervalued relative to its earnings growth.
• Strong Profitability: With a Return on Equity (ROE) of 19.65%, YELP demonstrates efficient use of shareholder capital, outperforming most peers in its industry.
• Financial Health: The company has no debt (Debt/Equity = 0) and a solid Current Ratio of 2.89, ensuring ample liquidity to meet short-term obligations.

Fundamental Strengths

Our fundamental analysis assigns YELP a rating of 7 out of 10, highlighting its strong profitability and financial health. Key takeaways include:

• High Margins: Gross margin of 90.88% places YELP among the top performers in its sector.
• Improving Profitability: Both operating and net margins have expanded in recent years.
• Undervalued Relative to Peers: YELP trades at a P/E of 16.18, below the industry average, and a forward P/E of 11.90, indicating room for upside.

For a deeper look, review the full fundamental analysis report here.

Our Peter Lynch Strategy screener lists more stocks that fit this strategy and is updated regularly.

Disclaimer

This is not investing advice. The observations here are based on data available at the time of writing. Always conduct your own research before making investment decisions.