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Even before Sergey Brin and Larry Page collaborated to create Google in the mid-1990s, there was another contender looking to establish itself as a premier search engine.

Founded by two Russian innovators, Ilya Segalovich and Arkady Volozh, Yandex (YNDX) - Get Free Report emerged as an offshoot of software that did full-text searches of the Bible and the International Patent Classification, a patent system used in more than 100 countries.

The word Yandex is an abbreviation of Segalovich's description of the essence of what this software would come to be in 1997, "yet another tracker."

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Over the past 12 months, Yandex's stock climbed a solid 85%, even as Russia-U.S. relations were under a microscope. The company even outperformed the likes of Google parent Alphabet, which rose 15%; Baidu, up 6.5%; and Yahoo!, which jumped 46%.

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Yandex has come a long way since its humble beginnings and is a force. The company employs 6,000 people, has a 57% share of all search traffic in Russia and continues to be the dominant search engine for users in Belarus, Kazakhstan, Turkey and Ukraine.

Because these markets are rapidly growing, Yandex stands to significantly increase its earnings compared with search engines that serve regions where new user growth has slowed.

Last summer, Yandex said that it would install navigation with real-time traffic data and other Internet connected features into Russian-sold Toyota Motor Camrys. This effort started in 2015 when Yandex entered into a similar arrangement with Honda Motor to equip some Russian trucks with navigation systems based on artificial intelligence.

The progress that Yandex has made in connected cars is certainly exciting and has contributed to the company's growth in recent years. Credit Suisse initiated coverage on Yandex with an outperform rating on Dec. 30.

Yandex's stock outperformance has come at a time when many foreign companies have disappointed investors. Many other overseas companies have seen a downward trend in sales and profit growth as a result of foreign currency exchange rates.

Several foreign companies have reported dismal earnings. Yandex, however has yet to disappoint investors.

Yandex beat analysts estimates by 10% in the third quarter, 29% in the second quarter and 54% in the first quarter.

Shares of Russian companies including Yandex, have received a boost following Donald Trump's victory in the presidential election.

Yandex trades at a price to forward earnings ratio of 26 times, compared with Alphabet, which trades at about 20 times forward earnings. Although Yandex seems overvalued when compared with Google, it also has greater growth potential in the developing countries that it serves.

In addition, sales in dollar terms rose 37% last year from 2015, despite the ruble falling to about 16 cents on the dollar from 20 cents.

Meanwhile, the company is steadily paying off the $500 million in debt it took on in 2013 at an average rate of 9.2% annually over the past three years. As the company achieves greater market penetration and executes on its initiatives, its share price should continue to rise.


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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.