Last year we listed some of the key challenges that faced Marissa Mayer when she took over as the CEO of Yahoo! Inc.. (NASDAQ:YHOO) What has changed for the company since then with regards to its fundamentals? In the Wall Street Journal, Amir Efrati and Rachel Emma Silverman have reviewed Yahoo’s performance including Mayer’s major acquisitions and some of the changes in the company’s work culture.
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In his book, The Dhandho Investor: The Low–Risk Value Method to High Returns, Mohnish Pabrai coined an investment approach known as "Heads I win; Tails I don't lose much." Q3 2021 hedge fund letters, conferences and more The principle behind this approach was relatively simple. Pabrai explained that he was only looking for securities with Read More
Yahoo! Inc.’s overall Fundamental Analysis Score: Up!
We scored the company’s fundamentals at 28/100 last year. This score is now at 53. The upward movement reflects an overall improvement across a range of parameters. The company still trades trades at a lower Price/Book multiple (2.1) than its peer median (2.9). Our fundamental analysis score is peer-based and computed with complete transparency.
Yahoo!Inc.’s (NASDAQ: YHOO) revenues performance is worse than its peer median (year-on-year change revenue of 0.04%) but its earnings have been relatively good — annual earnings changed by 276.2% compared to the peer median of -12.4%, implying that relative to peers, it is focused on earnings and/or selective about what top-line growth opportunities it pursues. Yahoo! currently converts every 1% of change in revenue into 5,815.5% of change in annual reported earnings. Last year it was a Laggard.
Since last year there have been changes to other attributes we examined like Drivers of Margin andCapital Investment Strategy as well. For more detailed analysis check out our free report.
New Challenges for Yahoo!
- Can the company actually outperform its peers by this time next year? Can Mayer change the market’s expectations of Yahoo’s growth? Despite its relatively high returns (ROE of 28.2% compared to the peer median ROE of 14.1%) the company trades at a lower Price/Book multiple of 2.1 compared to its peer median of 2.9 (PE of 8.0 compared to peer median of 26.6).
- Yahoo!Inc. (NASDAQ: YHOO) is still margin driven; its relatively high profit margins are burdened by relative asset inefficiency.
- Substandard Growth Expectations or the Bottom of the growth cycle? The slow revenue growth over the last few years and the stock price’s relatively low PE ratio of 8.0 implies that the market is expecting relatively low future growth. Could Mayer prove them wrong once again?