Groupon Inc. or It's Not Even Close

Groupon Inc. or It's Not Even Close

When online discounter went public last week, it nearly doubled its IPO price of $16 per share in its first day of trading. At the same time, Groupon was just a week removed from getting lambasted after announcing "disappointing" earnings. Though the two online deals companies have slightly different business models, they play in the same sandbox.

It's natural for investors to compare and Groupon to determine which, if either, would make the better investment. Despite Groupon's recent stock price beating,, by almost any measure, doesn't belong in the same ballpark. Yet has won the hearts and dollars of investors, while Groupon continues to languish.

A look at opened its figurative doors in 1998, nearly 10 years before Groupon began offering its online deals. With more than 700 companies and 2,000 brands in's arsenal, consumers can download its coupons and save on a variety of products.

While Groupon works with its merchandisers to offer bulk coupons for its deals, partners with its retail clients using a platform that allows customers to print and redeem coupons. The beauty of the deal for is that it makes money with each printed coupon, whether or not a consumer actually uses the coupon. Revenue is also generated by selling advertising on the website.

In its most recent quarter, reported revenue of $52.6 million, a nearly 50% jump from $35.79 million in the fourth quarter of 2012. On an annual basis, also generated about 50% higher revenue last year compared to 2012. While small, the revenue is certainly trending in the right direction, as you'd expect for a newly traded company.

The problems lie in's net income results and its prospects for becoming profitable anytime soon. Though it saw improvement, lost more than $11 million in 2013; it doesn't expect to become profitable for a few years due to costs associated with expanding into new markets, planned increases in research and development, and sales expenses.

Advantage, Groupon
The story becomes a little hard to digest when you compare its financials, number of users, and business model with Groupon. After reporting a solid fourth quarter and 2013 last month, Groupon's stock price dropped nearly 20% and hasn't recovered much since. Many analysts cited Groupon CEO Eric Lefkofsky's projection of lower than expected earnings this quarter due to costs associated with the recent acquisitions of Ticket Monster and Ideeli.

Analysts choosing to not factor in the costs of assimilating acquisitions makes little to no sense, but it's the financial comparisons between and Groupon that are really mind-boggling. As it stands today, is trading at 11.68 times annual revenue, compared to Groupon's 2.18 trading number. Groupon has a whopping $1.2 billion in cash and equivalents, compared to's $39 million.

Groupon also has multiple lines of revenue, expanding beyond the highly competitive online deals business with its extremely successful Goods unit. In the company's most recent earnings announcement, Lefkofsky credited Goods for driving Groupon's record-breaking results. Just as with an investment portfolio, diversifying revenue streams is a sound business decision, and one Groupon is executing. The shift to mobile is also on track, with nearly half of Groupon's holiday season transactions completed on the go.

Final Foolish thoughts
Groupon is also head and shoulders above when it comes to user numbers. Its 44.9 million users, geographically diversified around the globe, dwarf's 17 million. Yet remains the darling of the investment community, while Groupon is scorned. No, this doesn't make sense, but Groupon is a great opportunity for investors in search of value.

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Tim Brugger 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.

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