The firm said it lowered its rating on the vacation and rental online marketplace as it feels the company is turning into a volume story, with greater emphasis placed on converting listings into bookings.
Shares of HomeAway are up 0.36% to $33.10 in pre-market trading today.
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"We rate HOMEAWAY INC (AWAY) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
Separately, TheStreet Ratings team rates HOMEAWAY INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
- The revenue growth greatly exceeded the industry average of 0.4%. Since the same quarter one year prior, revenues rose by 31.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for HOMEAWAY INC is currently very high, coming in at 85.79%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 3.38% is above that of the industry average.
- Despite currently having a low debt-to-equity ratio of 0.33, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Even though the debt-to-equity ratio shows mixed results, the company's quick ratio of 3.28 is very high and demonstrates very strong liquidity.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 29.3% when compared to the same quarter one year ago, falling from $5.47 million to $3.87 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Internet & Catalog Retail industry and the overall market, HOMEAWAY INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: AWAY Ratings Report