Stocks-Let’s Look at Angie’s List

angieslist-logoOk, so I’m pretty new at stock picking but I’m going to assess my “Angie’s List” stock to see if I should dump it.  Just over a year ago I purchased 59 shares of this stock for $16.75 per stock at a cost of $988.25 plus $10 broker commission.  I didn’t research much, just read an article or two about it.  Today the stock is worth $6.80 per share.  Ugh.  But perhaps it is poised to go up.  I’m going to try to determine if there is a good chance for this or if I should cut my losses.

I found this article today on yahoo finance and I’m going to go over it as part of my research into whether to keep this stock or get rid of it.  I have to look up some of the terms as I go along (I will share the definitions with my readers-definitions and my thoughts will be bolded for clarity) to refresh my memory.  If I am making any glaring errors I hope folks won’t be shy about letting me know.  Also, if you are an investor and have any great information sources for me, please share.  I’m a newb!

In the report, Jeff Houston noted, “We maintain our OUTPERFORM investment rating and $10 price target. Okay so that’s a start although it will be some time before this stock goes up to $16 per again…if ever right?

The company is successfully transitioning to a marketplace, which has required a change in its sales strategy and fine‐ tuning of its product.  Hmmm…how is Angie’s List different from say…Craigslist?  Angie’s website says “Only highly rated companies can offer services through Angie’s List”.  Is that actually true?  They have been offering my little company a place on the list for months via email (after I inquired about their services).  My impression is that all I had to do was pay money and I’m on the list.  Still, I guess your average person looking for some kind of service provider probably doesn’t know that and would still use Angie’s list to find help and THAT will make service providers want to get on the list….or to the top of the list. 

The company is poised to improve profitability significantly in 2015 and 2016, which has been underappreciated by investors, driven by the higher percentage of SP revenue generated by renewal contracts that carry an 80‐85% profit margin, dramatically higher than first‐year‐contract margins of 0‐5%.  SP revenue is Service Provider Income-and it looks like return customers (what percentage ARE return customers?) are highly profitable at %80-85%!  That’s a pretty good rate of return if it’s true. 

We also like Angie’s revenue visibility (I see them on the very little tv I watch and also, since I looked them up on line, I’m also seeing their ads on some of the other sites I go to so they are doing some SERIOUS advertising.  differentiated offering something for everyone, ability to increase advertising prices there is some elasticity in what they can get away with charging?  How would one know this?  , operating leverage (it must be low if they like it-high leverage would mean too much is riding on each sale), and new monetization initiatives diverse ways to make money (i.e., $10‐15 billion of transactions and non‐paying SPs Lots of potential-apparently there are service providers who have NOT paid but might in the future. Furthermore, valuation is still attractive after today’s 50% increase with a 2016 EV/Revenue Enterprise Value to Revenue-this calculation is used by potential buyers of a company to determine if the company is worth buying (among other things) and it is how a company is valued per each dollar of revenue (earnings). Article on this here.  of about 1.0x and it is a takeout candidate , in our view.”  From what I’m reading, 1.0x is a respectable Ev/Revenue multiple.  (oh!  I guess because of the above mentioned things, investors might be looking to buy it out!  Will that raise or lower the per share price of Angie’s List?  I guess it will depend on who buys it right?  The linked article also says you have to watch the debt load too  and here is where they restructure their debt.  The author of the Seeking Alpha article I linked said that for investments, he only considers companies “whose total debt is less than twice its most recent fiscal year’s EBITDA”

Ok, so I go to Angie’s List 4th quarter results from last month and its EBITDA was $20.9 million (over twice last year’s) so….

Oh wait…I should use the most recent year’s EBITDA (I don’t know what EBITDA means yet-will go over it tomorrow. For now, let’s just crunch the numbers.  The FULL YEAR (2014) EBITDA was only 4.2 million dollars.  Big difference. 

So here’s the formula:(Number crunching time)

Debts should be < 2 times $4,200,000

Are Debts (current or for 2014?) < $8,400,000

Ok so where is “Debt” on the annual report?  I hope it’s the section that says “Long-term debt, net”  If so, the formula looks like this:

Is $58,854,000 < $8,400,00 

No, not even close.  This could be a very poor investment for a buyer, if my calculations are correct.  Too much debt.

Is anyone still with me? 

Are you astounded at how I learn?  I learn best like this, figuring things out as I go.  Google is my best friend.  So are mistakes.  I’m sure I have screwed this up on some fundamental level.  Help me learn! 

Oh and I know that every “expert” investor  (or investment author) has different ways of determining the value or potential value of a stock.  So tomorrow…or whenever I can stomach this again, I will find another guy’s formula and try it out. 

If you are still reading you are a loyal blog friend…or a sucker for punishment.  🙂

For the newbs to my blog, be advised updown is a VIRTUAL stock market game.  I am not playing with real money and I’m not giving investment advice.

About Maureen, Living in a Van

I'm a free-sleeper living in a van in the prettiest part of the world. I do this partly due to financial circumstances and partly because I love a good adventure.
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4 Responses to Stocks-Let’s Look at Angie’s List

  1. geezer says:

    Yeah , the “sucker ” sounds about right ;-P

  2. Me says:

    Are posts about stocks of interest to you at all Mr. Geezer?

  3. geezer says:

    At this point it seems rather like starting a book in the middle. I don’t know where to even start.

  4. geezer says:

    Please , don’t “Mr” me , and I won’t “Ma’m ” you

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