Update 4:34 PM EST: Yelp Inc. (NYSE:YELP) stock recovers in after-hours trading, company’s shares are up 3.36% to $6.30 at the time of writing.

Yelp Inc (NYSE:YELP) released its earnings numbers for the three months through March 2014 this afternoon in the wake of the bell’s ring on Wall Street. The company showed a loss per share of $0.04 for the three month period. Revenue amounted to $76.4 million in the quarter, which the company recorded as its first of fiscal 2014. On Wednesday’s market shares in the firm dropped in anticipation of the earnings release, and finished the day at $58.32.

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Analysts following the web-based reviews business were looking for loss per share of ($0.06) for this afternoon’s earnings report. Revenue was expected to come in at $75.1 million. the consensus forecasts came from a Businessweek survey of 20 analysts following Yelp Inc (NYSE:YELP). In the same three months of 2013 Yelp managed to earn 1 cents on revenue totaling 46.1 million.

Yelp earnings show substantial growth

Despite the prodigious growth evidenced in this afternoon’s earnings report, the biggest problem that Yelp Inc (NYSE:YELP) faces is still proving that its local advertising model can produce a reasonable revenue stream and protect itself from competition. If local ads on Yelp Inc (NYSE:YELP) begin to work, there appears little to stop ad giants like Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) or Facebook Inc (NASDAQ:FB) from encroaching on the company’s turf.

Until the company manages to show the efficacy of local ads on a wide scale it is unlikely that the other firms in the industry will do much to enter into the market. Yelp Inc (NYSE:YELP) brought in $233 million in revenue in 2014. Google Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) rarely moves an inch for that kind of money. Growth is expected to continue at a relatively high rate in the next two years, and that, though bolstering Yelp profit, might attract the big players into the market.

Local advertising has never held the kinds of rewards that national, or statewide, campaigns have, and it seems that most of the big web advertisers are chasing that market. Yelp is valued at more than $4 billion, and that implies a serious amount of growth in the years to come. The firm’s non-GAAP 2013 multiple stands at 233 times earnings. Investors need serious effort from the company’s management if they’re to keep buying shares at that level.

Yelp still needs to prove its worth

Yelp Inc (NYSE:YELP) earnings may have shown a huge amount of growth in its core business, but that may not be enough for the company’s investors. There is a substantial amount of growth already priced into the company’s stock, and many investors are likely to need a huge amount of convincing to send those values higher. Shares in Yelp have lost more than 16% of their value so far in 2014, and they may have more to fall if analysts are right about momentum stocks.

It seems that the markets high-vlaued growers are set to deflate, or at the very least struggle to add value, in 2014. That trend has been clear in the first three months of the year, and it has not been altered as a result of earnings released thus far. Yelp Inc (NYSE:YELP) needs to do more than it did in this afternoon’s report to justify its current valuation.