Analysts are expecting OpenTable to report second-quarter earnings of $0.27 a share, compared with $0.11 a year earlier. Revenue is estimated to increase to $35.3 million from $22.5 million, according to a poll of analysts by Thomson Reuters. The company should continue to benefit from improved restaurant trends and general increased usage and acceptance of mobile-reservation bookings.
The following is taken from a first-quarter report published by
, an independent-research unit of
that uses a quantitative model to evaluate stocks.
OpenTable's very impressive revenue growth greatly exceeded the industry average of 26.1%. Since the same quarter one year prior, revenues leaped by 58.6%. This growth in revenue trickled down to the company's bottom line, improving the earnings per share.
We rate OpenTable 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 largely solid financial position with reasonable debt levels by most measures, robust revenue growth and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock itself is trading at a premium valuation.
Powered by its strong earnings growth and other important driving factors, this stock has surged by 56% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
>>For upcoming earnings and estimates, see our
The return on equity has improved slightly when compared to the same quarter a year earlier. This can be construed as a modest strength in the organization. When compared to other companies in the Internet software and services industry and the overall market, OpenTable's return on equity is below that of both the industry average and the S&P 500.
OpenTable is extremely liquid. Currently, the quick ratio is 2.28, which clearly shows the ability to cover any short-term cash needs. The company's liquidity has decreased from the same period last year.
From a valuation perspective, OpenTable's current price-to-earnings ratio indicates a significant premium compared to an average of 39.53 for the Internet Software & Services industry and a significant premium compared to the S&P 500 average of 15.89. For additional comparison, its price-to-book ratio of 14.55 indicates a significant premium versus the S&P 500 average of 2.14 and a significant premium versus the industry average of 7.83. The price-to-sales ratio is well above both the S&P 500 average and the industry average, indicating a premium. Upon assessment of these and other key valuation criteria, OpenTable proves to trade at a premium to investment alternatives within the industry.
Equity research manager Chris Stuart, CFA, joined TheStreet Ratings after working as a senior investment analyst with Merrill Lynch covering small-cap equity and alternative investment strategies. Prior to that, Stuart worked for One Beacon Insurance as an actuarial analyst and at H&R Block as a financial adviser. Stuart earned his bachelor's degree in finance from the University of Massachusetts, Amherst. He holds a Chartered Financial Analyst (CFA) designation and is a member of the Boston Security Analysts Society (BSAS) and the CFA Institute.