Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, local services review site has received the dreaded one-star ranking.
With that in mind, let's take a closer look at Angie's List and see what CAPS investors are saying about the stock right now.
Angie's List facts
Internet software and services
Co-Founder/CEO William Oesterle
Co-Founder/Chief Marketing Officer Angela Bowman
Trailing-12-Month Return on Capital
$62.9 million / $14.9 million
Sources: S&P Capital IQ and Motley Fool CAPS.
On CAPS, 92% of the 318 members who have rated Angie's List believe the stock will underperform the S&P 500 going forward.
I actually like this company, but I struggle to justify the valuation. Hard to call when the valuation will cave, but as long as there is positive momentum this should rise. The two catalysts to push it down are an earnings call that shows acceleration slowing. Second is a hiccup in the housing market.
My look on valuation:
Enterprise value: $1.1B
Value per member (current): $559
Reported market penetration: 6.6%
Market penetration in Indianapolis market (most mature, 10+ years): 20%
Potential total market size: 3x what it currently is
Total member potential: 6.1M
EV / total member potential: $184 per member
Revenue per member in mature markets (pre 2003): $156
Revenue per member in mature markets net of marketing: $114
So if we assume they achieve full market penetration and are able to match their mature market revenue per member, this business still trades at 1.2x that revenue per member and 1.6x revenue net of marketing per member. That just seems a little like a stretch.
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The article Why Angie's List Is Poised to Pull Back originally appeared on Fool.com.
Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.