YELP Inc (NYSE:YELP) Presents a Compelling Peter Lynch-Style Investment Case

Investors looking for long-term growth chances at fair prices frequently use established methods that mix growth possibility with money management. The Peter Lynch investment style, made famous in his book One Up on Wall Street, highlights finding companies with lasting profit increases, good money condition, and fair prices. This plan centers on basic study instead of market prediction, looking for firms that show steady earnings without high debt. By using particular filters for profit growth, price measures like the PEG ratio, and money steadiness numbers, this process helps find companies set for lasting achievement.

Money Condition and Steadiness

Yelp Inc (NYSE:YELP) shows very good money condition that fits with Lynch's focus on company lasting power. The company works with no debt, removing interest cost worries and giving working freedom. This no debt situation goes far beyond Lynch's chosen debt-to-equity limit under 0.6, reaching a full 0.0 ratio. The company's cash position stays solid with a current ratio of 3.27, showing good ability to cover near-term needs. This money caution gives a firm base for handling economic changes while chasing growth plans.

Growth Path and Lasting Power

The company's past record displays notable profit growth that fits inside Lynch's aimed growth span. Yelp has reached a five-year EPS growth rate of 25.0%, fitting nicely between Lynch's chosen 15-30% lasting growth measures. This past growth shows the company's skill to increase earnings without hitting the high marks Lynch saw as unstable. Moving ahead, experts predict continued EPS growth near 18.2% each year, hinting the company keeps its growth speed while staying clear of the swings that often come with fast-growth cases.

Price Evaluation

Yelp's price measures show a pleasing shape for growth-at-fair-price investors:

• PEG ratio of 0.58, much under Lynch's limit of 1.0
• P/E ratio of 14.60, matching up well to field norms
• Enterprise value to EBITDA ratio priced lower than 90% of field rivals

The especially interesting PEG ratio, which changes the P/E number for growth, suggests the market might be pricing Yelp's growth chances too low compared to its present earnings ability. This price control fits with Lynch's rule of steering clear of high costs for growth, instead searching for companies where growth hopes seem fairly priced.

Earnings and Effectiveness

The company's working effectiveness meets Lynch's high marks for profit making. Yelp reaches a return on equity of 20.0%, easily passing Lynch's 15% lowest bar. This shows good use of owner money to create profits. More effectiveness numbers further support the company's strong working performance:

• Return on invested capital of 19.8%, doing better than 87% of field rivals
• Profit margins displaying steady gains in recent years
• Gross margins over 90%, showing good price control and cost management

Basic Study Summary

Based on Chartmill's full basic study, Yelp gets a total score of 7 out of 10, with especially high marks in profit making (8/10) and money condition (9/10). The study points out the company's great return numbers, clean balance sheet, and fair price compared to both field rivals and wider market measures. While growth numbers show some slowing from past highs, the company keeps solid growth chances mixed with money steadiness that makes an interesting risk-reward picture for long-term investors.

Investment Points

For investors using Lynch's method, Yelp stands for the kind of business that mixes clear operations with countable money control. The company's local business platform gives services that people often use and know, matching Lynch's "put money in what you know" thinking. The mix of lasting growth, good profit making, no debt, and fair price creates a profile that meets several Lynch rules at once. While all investments hold natural risks, Yelp's money traits suggest the company has the basic strengths Lynch prized in long-term portfolio picks.

Investors curious about finding more companies that fit Peter Lynch's investment rules can search more filter findings using the Peter Lynch Strategy Screener.

Disclaimer: This study is built on basic information and past performance. It is not meant as investment guidance and should not be seen as a suggestion to purchase or sell any security. Investors should do their own research and talk with money advisors before making investment choices.